will accrue an increasing credit balance in the reconciliation account, as the season proceeds, so that at the end of the processing season, an adequate balance has been built up to finance the annual plant overhaul during the hutdown period. Conversely, maintenance may be costed as a fixed percentage of the capital cost of the plant(See Table 13.2) Consumable stores These items comprise all purchases of materials ancillary to production, such lubricants, adhesives, paint, cleaning materials, industrial clothing, etc. Again, an allowance related to weight of throughput is made, with conciliation being made as factual expenditure is known Water The actual metered quantity is charged to the weekly production Electricity The cost of power and light is calculated from meter readings, and the apportionment to the various products, or departments, is made as for Unpacked Cost With the above information, and costs apportioned to the relative products made in the week, an'unpacked costis computed. The main costs are factual, based on known usage and value, and the arbitrary charges per pound of end roduct, such as maintenance, overhead consumables, etc, are corrected continuously in the reconciliation account, as the true costs become known Pa The specific packaging materials are charged to each product in its particular cost column, and after this addition has been made, a'packedcost, or ' ex factory'cost is calculated. This can now be evaluated against the previously fixed'standardcost, to measure the efficiency of the factorys operation Selling Cost and Transportation Having established the true factory cost and its relation to the standard cost, the operations of selling, promotion and shipping have to be considered. The dehydrator will have to decide whether, in the main, he is going to sell his production in bulk packs to wholesale, catering and manufacturing buyers, or specifically to retail outlets Sales budgets will vary widely in accordance with this decision, as will promotion budgets and transport costs, and it is, therefore, not possible to elaborate in this chapter on this area of economic practice
will accrue an increasing credit balance in the reconciliation account, as the season proceeds, so that at the end of the processing season, an adequate balance has been built up to finance the annual plant overhaul during the shutdown period. Conversely, maintenance may be costed as a fixed percentage of the capital cost of the plant (See Table 13.2) Consumable Stores These items comprise all purchases of materials ancillary to production, such as lubricants, adhesives, paint, cleaning materials, industrial clothing, etc. Again, an allowance related to weight of throughput is made, with reconciliation being made as factual expenditure is known. Water The actual metered quantity is charged to the weekly production. Electricity The cost of power and light is calculated from meter readings, and the apportionment to the various products, or departments, is made as for overheads. Unpacked Cost With the above information, and costs apportioned to the relative products made in the week, an 'unpacked cost' is computed. The main costs are factual, based on known usage and value, and the arbitrary charges per pound of endproduct, such as maintenance, overhead, consumables, etc, are corrected continuously in the reconciliation account, as the true costs become known. Packaging The specific packaging materials are charged to each product in its particular cost column, and after this addition has been made, a 'packed' cost, or 'ex factory' cost is calculated. This can now be evaluated against the previously fixed 'standard' cost, to measure the efficiency of the factory's operation. Selling Cost and Transportation Having established the true factory cost and its relation to the standard cost, the operations of selling, promotion and shipping have to be considered. The dehydrator will have to decide whether, in the main, he is going to sell his production in bulk packs to wholesale, catering and manufacturing buyers, or specifically to retail outlets. Sales budgets will vary widely in accordance with this decision, as will promotion budgets and transport costs, and it is, therefore, not possible to elaborate in this chapter on this area of economic practice. 257
Financial Assumptions for Feasibility Studies for New Projects To illustrate these assumptions for an overseas Study, the following data will ave to be collated by a team consisting of a food technology consultant, a consultant horticulturalist, a plant and machinery design engineer, an architect with intimate knowledge of building design in the region of operation, and a corporate finance consultant To arrive at a format for the financial projections a hypothetical project is taken as an example, located in, say, Southern Europe. In this case the farming would be on the'estate' pattern on irrigated land, mainly controlled by the investors in the project. Fig. 13. 1 shows the best cropping time for a range of 6 different types of vegetables, and 2 the possible processing times. Realistically the processing period would be limited to about ten months when the factory is on full stream, to take account of annual shutdown, holidays, etc, but this shut-down period would be integrated with the cropping programme at such times when harvested crops(onions and carrots) could be stored over the period of plant overhaul, in controlled temperature conditions. Also the programme would need to be flexible to meet the market conditions at the time of operation. Onions, for example, could be increased in tonnage, and other vegetables decreased. Fig. 13. 1, in fact, indicates what vegetables have already been grown in trials and for commercial fresh markets in the region, and is only a pointer to the range available for processing The Pre-Production period is assumed to be 9-12 months, during which time construction work could be carried out, indents for machinery and other equipment would be progressed, horticultural programmes would be finalised with the growers, and towards the end of the period supervisory staff would be selected and engaged The plant would be operated at 60 percent capacity for Year 1, 80 percent in Year 2 and 100 percent in the third, fourth and fifth years In the Financial Assumptions, the farm equipment would be financed by the growers, and these costs are quite separate from the factory capital expenditure. All farm costs, however, must be calculated in the Study to arrive at a factory-gate price for the raw material Fig. 13. 2 also indicates that two multi-stage band dryers are envisage in order that two vegetables may be processed simultaneously at periods where harvesting times overlap. This level of drying capacity would be needed for an annual putative throughput of 30,000 tonnes of raw vegetables In the Study all financial calculations would be in local currency but for the purpose of this example, all calculations have been converted to ￡ Sterlin
Financial Assumptions for Feasibility Studies for New Projects To illustrate these assumptions for an overseas Study, the following data will have to be collated by a team consisting of a food technology consultant, a consultant horticulturalist, a plant and machinery design engineer, an architect with intimate knowledge of building design in the region of operation, and a corporate finance consultant To arrive at a format for the financial projections a hypothetical project is taken as an example, located in, say, Southern Europe. In this case the farming would be on the 'estate' pattern on irrigated land, mainly controlled by the investors in the project. Fig. 13.1 shows the best cropping time for a range of 6 different types of vegetables, and Fig. 13.2 the possible processing times. Realistically the processing period would be limited to about ten months when the factory is on full stream, to take account of annual shutdown, holidays, etc, but this shut-down period would be integrated with the cropping programme at such times when harvested crops (onions and carrots) could be stored over the period of plant overhaul, in controlled temperature conditions. Also the programme would need to be flexible to meet the market conditions at the time of operation. Onions, for example, could be increased in tonnage, and other vegetables decreased. Fig. 13.1, in fact, indicates what vegetables have already been grown in trials and for commercial fresh markets in the region, and is only a pointer to the range available for processing. The Pre-Production period is assumed to be 9-12 months, during which time construction work could be carried out, indents for machinery and other equipment would be progressed, horticultural programmes would be finalised with the growers, and towards the end of the period supervisory staff would be selected and engaged. The plant would be operated at 60 percent capacity for Year 1,80 percent in Year 2 and 100 percent in the third, fourth and fifth years. In the Financial Assumptions, the farm equipment would be financed by the growers, and these costs are quite separate from the factory capital expenditure. All farm costs, however, must be calculated in the Study to arrive at a factory-gate price for the raw material. Fig. 13.2 also indicates that two multi-stage band dryers are envisaged in order that two vegetables may be processed simultaneously at periods where harvesting times overlap. This level of drying capacity would be needed for an annual putative throughput of 30,000 tonnes of raw vegetables in any case. In the Study all financial calculations would be in local currency but, for the purpose of this example, all calculations have been converted to €Sterling. 258