feasibility on ice candy shop

MUFAZZAL TURAB ALI 10230

SUBMITTED TO: SHEHRYAR MALIK

DATE OF SUBMISSION: 27th APRIL 2010

TABLE OF CONTENTS

S.No Particulars Page Number

1 Acknowledgement 1

2 Scenario 2-3

3 Pictures 4-5

4 SWOT ANALYSIS, FOCUSED DIFFERENTIATION,EDGE 6

5 Calculation of variable and fixed cost 7-8

6 Amortization table

7 Sales & Cost

8 Operating expense

9 Cash budget

10 Income statement

11 Balance Sheet

12 NPV & IRR

13 Financial Ratios

14 References

ACKNOWLEDGEMENT

First of all, I would like to thank Almighty Allah for blessing me with the courage, strength, and ability with which I have able to complete this report successfully.

Furthermore, I would like to extend my special thanks and appreciation to our course instructor, MR. SHEHRYAR MALIK for his constant guidance and encouragement throughout the semester, and for making this feasibility report an incredible learning experience. I would specially like to thank Mr. Atif (Marketing person Dolmen Mall) and Mr. Tayab (Owner of Ice candy stall).

I am benefited a great deal while searching for the material and making the report and hope that people will also be benefited from it.

OoLaLa!!! Ice Candy Shop offers three types of ice candy plain cup, special cup and jumbo which it will sell for Rs.40/-,Rs.60/- and Rs.120/- per unit. We manage the inventory and finances of the shop. Estimated sales for first year are as follows:

Plain cup 3000 units (monthly) Special cup 1500 units (monthly) Jumbo 600 units (monthly)

We are preparing for a meeting with our financer to arrange financing for the business to start. Based on our sales forecast and the following information provided by us, your job as our financial analyst is to prepare a monthly cash budget, monthly and quarterly Performa income statement, a quarterly balance sheet and all necessary supporting schedules.

We are going to work on cash basis and payment for material will be made at the time of purchase.

The major cost of production is the purchase of raw materials in the form of syrups, dry fruits, condensed milk etc and raw material costs are expected to increase by 10% each year. Labor is hired on monthly wage of Rs.8000/- and wage is also expected to increase by 10%. The place in Dolmen mall is hired on agreement for three years at constant rent of Rs.30000/- (per month) after three years it will increase by 20%.

Ice crush machine and freezer will be fully depreciated in 8 years. Electric fixtures will be fully depreciated in 3 years. The shop will not use the earnings for three years to develop business in every mall. The average tax rate is 30%. Loan amounts will be paid monthly.

We want to start a business of ice candy shop with a name of OoLaLa!!! Ice Candy Shop with Rs.500000/-. The business will have expected sale of Rs.3816000 in 1st year, Rs.4823100/- in 2nd year and Rs.6046470/- in 3rd year. The expected cost of goods sold are Rs.2203822/- in 1st year, Rs.2424204/- in 2nd year and Rs. 2666625 in 3rd year. Ice crush machine, freezer will be fully depreciated in 8 years and electric fixtures will be fully depreciated in 3 years. The average tax rate is 30%. We are predicting that cost will increase by 10% each year (except rent).

SHOP DEMO

PLAIN CUP RS.40/-

SPECIAL CUP Rs.60/-

JUMBO Rs. 120/-

CRUSH MACHINE Rs.17000/-

SWOT ANALYSIS:

• Strengths:- – Flexibility.– Hygienic product will be provided to customer. – Variety in product.

• Weaknesses:- – Not easy to make image for Sugar free candy for diabetic patients.– Consumers easily switch to alternative product (Ice Cream).– Leverage will be high because the expenses and fixed cost are high due to mall.

• Opportunities:- – Can expand our business in other places.– More variety could be introduced in future.– We make a maximum profit just because of the atmosphere of the dolmen mall

food court.– Climate of Karachi is hot.– In Dolmen Mall there is no competition for ice candy stall, there are ice cream

and fast food stall but ice candy stall will be a new product for mall.

• Threats:- – None profitable months could damage our product image.– Pricing as compared to outside mall stalls will be high.– It will be difficult to create awareness about presence of ice candy stall in mall

because it is not been introduced till yet in mall.

Focused Differentiation:

The market is narrow because we are opening ice candy stall in mall so we will be targeting the visitors of mall. It is not available in any mall so it will be a unique product for a mall. The price is relatively high as compared to the ice candy stalls available in other areas.

Competitive Advantage:

The quality of our product will be high and hygienic

CALCULATION OF VARIABLE COSTPlain Cup

Ingredients Cost (Rs.) QuantityNo.of Units Per Unit

Ice(Block) 50Block of ice 35 1.4

Flavor(Orange) 300 Per litre 180 1.7

Flavor(Ice cream soda) 300 Per litre 180 1.7

Flavor(Rooh Afza) 300 Per litre 180 1.7

Chocolate 120 Per litre 180 0.7

Condensed milk 60 Per can 7 8.6

Disposable cup & spoon 500 Packet 100 5

1630 20.7

Wastage(5%) 81.5 1.0

Total 1712 22

CALCULATION OF VARIABLE COSTSpecial Cup

Ingredients Cost (Rs.) Quantity No.of UnitsPer Unit

Ice(Block) 50 Block of ice 35 1.4Flavor(Orange) 300 Per litre 180 1.7Flavor(Ice cream soda) 300 Per litre 180 1.7Flavor(Rooh Afza) 300 Per litre 180 1.7Chocolate 120 Per litre 180 0.7Condensed milk 60 Per can 7 8.6

Pineapple 70 Per can 16 4.4Cashew nuts 1300 Per Kg 220 5.9Coconut 70 Per Kg 45 1.6Keeshmish 90 Per Kg 40 2.3Disposable cup & spoon 500 Packet 100 5 3160 34.8Wastage(5%) 158 1.7Total 3318 36

CALCULATION OF VARIABLE COST

Jumbo Box

Ingredients Cost (Rs.) QuantityNo.of Units Per Unit

Ice(Block) 50 Block of ice 17 2.9

Flavor(Orange) 300 Per litre 90 3.3

Flavor(Ice cream soda) 300 Per litre 90 3.3

Flavor(Rooh Afza) 300 Per litre 90 3.3

Chocolate 120 Per litre 90 1.3

Condensed milk 60 Per can 4 15.0

Pineapple 70 Per can 8 8.8

Cashew nuts 1300 Per Kg 110 11.8

Coconut 70 Per Kg 22 3.2

Keeshmish 90 Per Kg 20 4.5

Disposable Box & spoon 1000 Packet 100 10

3660 67.5

Wastage(5%) 183 3.4

Total 3843 71

CALCULATION FOR FIXED COST

ItemQuantity Rate Value Life

Per day

Dep per month

RS RS RS RSFreezer 1 28000 28000 8 10 292Ice Crush Machine 1 17000 17000 8 6 177Electric Fixture 2000 3 2 56Rent expense per month 30000 1000 Labor 2 8000 16000 533 Electricity, Maintenance 8000 267 8000Supplies 400 13 FIXED COST PER DAY 1831 Expense amount for cash budget 1813 54400 Fixed cost for 2011 1880 1897 Fixed cost for 2012 1960 1977

SALES (2010)

SALES PriceQuantity Per day sale Per month sale

Expected sale of plain cup 40 100 4000 120000Expected sale of special cup 60 50 3000 90000Expected sale of jumbo 120 30 3600 108000

Monthly Income 10600 318000

COST (2010)

Particulars COS Quantit Per day cost Per month cost

T y

RS RS RSMaterial cost of plain cup 22 100 2170 65100Material cost of special cup 36 50 1825 54741Material cost of jumbo 71 30 2127 63811Total material cost 183652

Fixed Cost 1831 54924TOTAL COST 6122 238576

MONTHLY PROFIT 79424

SALES (2011)

SALES PriceQuantity Per day sale Per month sale

RS RS RSExpected sale of plain cup 45 115 5175 155250Expected sale of special cup 65 58 3738 112125Expected sale of jumbo 130 35 4485 134550

Total 13398 401925

we are expecting 15%increase in sale each year

COST (2011)

ParticularsCOST

Quantity

Per day cost Per month cost



Expected increase in cost is 10%except rent

SALES (2012)

SALES PriceQuantity

Per day sale

Per month sale

RS RS RSExpected sale of plain cup 50 132 6612.5 198375Expected sale of special cup 70 66 4629 138863Expected sale of jumbo 140 40 5555 166635

Total 16796 503873

COST (2012)

ParticularsCOST

Quantity

Per day cost

Per month cost



OPRERATING EXPENSE Qty Rate RSEmployees 2 8000 16000Monthly Total 16000Yearly Total 12 192000 Maintenance 8000Rent 30000Depreciation 524Supplies 400Total Expenses 38924Total Operating Expenses 230924

EXPENSE AMOUNT FOR CASH BUDGET 54400

CASH BUDGET(2010)

PARTICULAR 1 MONTH 2 MONTH

3 MONTH

4 MONTH

5 MONTH

6 MONTH

RS RS RS RS RS RSOPENING BALANCE

242,600

286,635

330,643

374,622

418,573

462,495

ADD: RECEIPT

SALES 318,

000 318

,000 318,

000 318,

000 318,

000 318

,000

CASH AVAILABLE

560,600

604,635

648,643

692,622

736,573

780,495

LESS: PAYMENT

Material cost 183,

652 18

3,652 18

3,652 18

3,652 18

3,652 18

3,652

EXPENSES 54,

400 54,

400 54,

400 54,

400 54,

400 54

,400

LOAN+INTEREST 13

,286 1

3,286 1

3,286 1

3,286 1

3,286 1

3,286

TAX(30%) 22

,627 2

2,655 2

2,683 2

2,712 2

2,740 2

2,769

NET CASH PAYMENT

273,965

273,993

274,021

274,049

274,078

274,107

NET CASH AVAILABLE

286,635

330,643

374,622

418,573

462,495

506,388

CASH BUDGET(2010)

PARTICULAR

7 MONTH

8 MONTH

9 MONTH

10 MONTH

11 MONTH

12 MONTH

RS RS RS RS RS RSOPENING BALANCE 506388 550252 594086 637891 681665 725409 ADD: RECEIPT SALES 318000 318000 318000 318000 318000 318000 CASH AVAILABLE 824388 868252 912086 955891 999665 1043409 LESS: PAYMENT

Material cost 183652 183652 183652 183652 183652 183652 EXPENSES 54400 54400 54400 54400 54400 54400LOAN+INTEREST 13286 13286 13286 13286 13286 13286TAX(30%) 22799 22828 22858 22888 22919 22949 NET CASH PAYMENT 274136 274166 274196 274226 274256 274287 NET CASH AVAILABLE 550252 594086 637891 681665 725409 769122

CASH BUDGET (2011-2012)

PARTICULAR 2011 2012

RS RS

OPENING BALANCE 769122 1825066

ADD: RECEIPT

SALES 4823100 6046470

CASH AVAILABLE 5592222 7871536

LESS: PAYMENT

Material cost 2424204 2666625

EXPENSES 676800 705600

LOAN+INTEREST 159428.7 159428.7

TAX(30%) 506723.1 797417

NET CASH PAYMENT 3767156 4329071

NET CASH AVAILABLE 1825066 3542465

INCOME STATEMENT 2010

PARTICULAR 1 MONTH

2 MONTH

3 MONTH

1st QUARTER

RS RS RS RS

SALES 318,000

318,000

318,000

954,000

LESS:COGS 183,652

183,652

183,652

550,956

GROSS PROFIT 134,348

134,348

134,348

403,044

LESS: OPERATING EXPENSES 54,924

54,924

54,924

164,773

EBIT 79,424

79,424

79,424

238,272

LESS:INTEREST 4,000

3,907

3,813

11,720

EBT 75,424

75,517

75,610

226,551

LESS: TAX (30%) 22,627

22,655

22,683

67,965

NET INCOME 52,797

52,862

52,927

158,586


PARTICULAR4 MONTH

5 MONTH

6 MONTH

2nd QUARTER

RS RS RS RS

SALES 318,000

318,000

318,000

954,000

LESS:COGS 183,652

183,652

183,652

550,956


134,348

134,348

403,044

LESS: OPERATING EXPENSES

54,924

54,924

54,924

164,773

EBIT 79,424

79,424

79,424

238,272

LESS:INTEREST 3,719

3,623

3,526

10,868

EBT 75,705

75,801

75,898

227,404

LESS: TAX (30%) 22,712

22,740

22,769

68,221

NET INCOME 52,994

53,061

53,128

159,183


PARTICULAR7 MONTH

8 MONTH

9 MONTH

3rd QUARTER

RS RS RS RS

SALES 318,000

318,000

318,000

954,000

LESS:COGS 183,652

183,652

183,652

550,956


134,348

134,348

403,044

LESS: OPERATING EXPENSES

54,924

54,924

54,924

164,773

EBIT 79,424

79,424

79,424

238,272

LESS:INTEREST 3,429

3,330

3,231

9,990

EBT 75,995

76,094

76,193

228,282

LESS: TAX (30%) 22,799

22,828

22,858

68,485

NET INCOME 53,197

53,266

53,335

159,797

INCOME STATEMENT 2010-2012

PARTICULAR 2010 2011 2012

RS RS RS

SALES 3,816,000 4823100 6046470

LESS:COGS 2,203,822 2424204 2666625

GROSS PROFIT 1,612,178 2,398,896 3,379,845

LESS: OPERATING EXPENSES 659,092 683091.67 711891.667

EBIT 953,086 1,715,804 2,667,953

LESS:INTEREST 41,662 26727 9897

EBT 911,424 1,689,077 2,658,057

LESS: TAX (30%) 273,427 506,723 797,417

NET INCOME 637,997 1,182,354 1,860,640

BALANCE SHEET JAN 2010

ASSETS LIABILITY AND EQUITY

fixed assets liablities

FreezerRS

28,000

long term liablities RS

400,000

Ice crush machine 17,000

Electric fixture 2,000

Total Fixed Assets

47,000 Total

400,000

current asset equities

cash RS

242,600 capital RS

100,000

Security deposit 180,000

Prepaid Rent 30,000

Supplies 400

Total Current Assets

453,000 Total

100,000

Total Assets 500,000

500,000

BALANCE SHEET 31 MARCH 2010

ASSETS LIABILITY AND EQUITY fixed assets liablities

FreezerRS 28,000 long term liablities 371,863

Ice crush machine 17,000 Electric fixture 2,000 less Acc.Depreciation 1573 Net Fixed Assets 45,427 Total 371,863


cash RS 374,622

capital RS 100,000

Security deposit 180,000 Prepaid Rent 30,000 Add:Earnings 158,586 Supplies 400 Total Current Assets 585,022 Total 258,586 Total Assets 630,449 630,449

BALANCE SHEET 30 JUNE 2010

ASSETS LIABILITY AND EQUITY

fixed assets liablities

FreezerRS

28,000

long term liablities RS

342,874


Electric fixture 2,000

less:Acc. 3146

DepreciationTotal Fixed Assets

43,854 Total

342,874


cash RS

506,388 capital RS

100,000

Security deposit 180,000

Prepaid Rent 30,000 Add:Earnings

317,768

Supplies 400

Total Current Assets 716,788 Total

417,768

Total Assets 760,642

760,642

BALANCE SHEET 31 AUG 2010


FreezerRS 28,000

long term liablities RS 313,006

Ice crush machine 17,000 Electric fixture 2,000 less Acc.Depreciation 4719 Total Fixed Assets 42,281 Total 313,006


cash RS 637,891 capital RS 100,000

Security deposit 180,000 Prepaid Rent 30,000 Add:Earnings 477,566 Supplies 400 Total Current Assets 848,291 Total 577,566 Total Assets 890,572 890,572

BALANCE SHEET 31 DEC 2010


FreezerRS 28,000


Ice crush machine 17,000 Electric fixture 2,000 less Acc.Depreciation 6292 Total Fixed Assets 40,708 Total 282,234


cash RS 769,122 capital RS 100,000

Security deposit 180,000 Prepaid Rent 30,000 Add:Earnings 637,997 Supplies 400 Total Current Assets 979,522 Total 737,997 Total Assets 1,020,230 1,020,230



FreezerRS 28,000


Ice crush machine 17,000 Electric fixture 2,000

less Acc.Depreciation 12,583 Total Fixed Assets 34,417 Total 149,532 current asset equities

cash RS 1,825,066 capital RS 100,000

Security deposit 180,000 Prepaid Rent 30,000 Add:Earnings 1,820,350 Supplies 400 Total Current Assets 2,035,466 Total 1,920,350 Total Assets 2,069,882 2,069,882



FreezerRS 28,000

long term liablities RS -


Electric fixture 2,000 less Acc.Depreciation 18875 Total Fixed Assets 28,125 Total - current asset equities

cash RS 3,542,465 capital RS 100,000

Security deposit 180,000 Prepaid Rent 30,000 Add:Earnings 3,680,990 Supplies 400 Total Current Assets 3,752,865 Total 3,780,990 Total Assets 3,780,990 3,780,990

NPV

Year 1 Year 2 Year 3 RS RS RSSales 3816000 4823100 6046470

less:cost 2203822 2424204 2666625less:operating expense 659092 683091.6667 711891.6667EBIT 953086 1715804 2667953less:interest 41662 26727 9897EBT 911424 1689077 2658057less:tax(30%) 273427 506723 797417EAT 637997 1182354 1860640Add:depreciation 6292 6292 6292OCF 644288 1188645 1866931DF(15%) 0.8696 0.7561 0.6575DCF 560273 898735 1227507 Initial investment 500000 NPV 2186515

IRR

Initial investment (PKR 500,000)

1st year PKR 560,273

2nd year PKR 898,735

3rd year PKR 1,227,507

IRR 134%

RATIOS

Ratios 2010 2011 2012

LEVERAGE RATIO

Cash coverage ratio= EBIT+depreciation

23.03 41.33 270.22 interest payment

Time interest earned = EBIT

22.88 64.20 269.58 Interset payments

PROFITABILITY RATIO

Net Profit margin= Netincome

0.17 0.25 0.31 sales

Operating profit

margin= netincome+interest

0.18 0.25 0.31 sales

REFERENCES

Mr.Tayab (Owner of Ice Candy Stall at Dhorajee. Material cost, Ice crush machine price).

Home Electronics & Prime Electronics.(Freezer cost). Mr. Atif (Marketing Person of Dolmen Mall). Mr.Asif Khan (Owner of Ice Depot at Tariq Road). DipShop & Minimelts staff for sale estimation.

StateBank Of Pakistan for KIBOR.

Documents

feasibility on ice candy shop