Cost-Benefit Analysis
A. Economic Feasibility
i. Benefit of the Project
Reduced processing time improving efficiency and profitability.
Higher market competitiveness due to better product quality.
Elimination of import costs through local machine production.
Encouragement of local industry and technological innovation.
ii. Cost Benefit Analysis
The costs of raw materials and the cost of standard items
Unit price Total price Rem
No Items Specification Unit Qt Birr Cent Birr cen ark
y t
1 sheet metal 2000x1000X2mm Pcs 3 1800 00 10,800 00
2 Angle iron 500x25x3mm thick Pcs 3 100 00 200 00
3 Round bar Ø 30x60mm m 2 1500 00 3000 00
4 Bolt and nut M8x60 mm Pcs 35 10 00 350 00
5 Two phase AC motor 2.2Kw,3HP,50HZ,1450rp Pcs 1
20,000 00 20000 00
m,
6 B-belt A56 Pcs 3 300 00 900 00
7 Ball bearing P205 Ø30 Pcs 6 1500 00 9000 00
8 Ball bearing 6205 Pcs 4 400 00 1600 00
9 Ball bearing 6310 Pcs 1 900 00 900 00
10 Electric cable Two in one M 2 120 00 240 00
11 electrode Ø3.5mm, Mt 12 Pac 0.5 2000 00 1000 00
12 Grinding disc A24TBF8500rpm80v Pcs 1 250 00 250 00
13 Cutting disc Ø180mm Pcs 1 400 00 400 00
14 Drill bit HSS Ø 14mm Pcs 1 200 00 200 00
15 Anti-rust Gray ltr 0.5 2000 00 1000 00
16 Paint Brown Ltr 0.5 2000 00 1000 00
17 Thinner Lit 2 360 00 720 00
Total material cost = 9799.99 birr =9800 birr
Electrical power consumption cost
It is the cost of electric power needed to machine and weld parts of the
project. Electric power is expressed (measured) by a unit watt (w) or kilo
watt (Kw). The cost of electric power is expressed in birr per KWH. The
electrical machines used and time consumed is indicated below:-
Table 1.3 Electrical power consumption cost
No Machine type Power Total Energy Payment Total
rating of machining for
consumed payment in
the
time in in KW 1KWH in
machine birr
hour
in KW Birr
2 Lathe machine 2.20kw 8:00 10 3.00 22.05
4 Arc welding machine 4.90kw 16:00 30.00 3.00 40.43
6 Drilling machine 1.30kw 1:00 2 3.00 2.3
8 Portable hand grinder 2.00kw 2:00 3 3.00 3.99
Total cost 118.405
birr
Machine Depreciation Cost
The cost of the operating machinery can be divided into two categories
such fixed cost and variable costs. All the costs are depended on either the
purchase price or the average investment in the equipment. It is not good to
assume a life expectancy beyond 15 years for any machine Depreciation
cost is termed as the reduction in value of the machine with the passage of
time. The performance of the machine are varies in different working
condition. The performance of the machine will be based on the age and
condition of the machine. It is important to note that many machines are no
longer available on the market, and new machine have entered the market.
Technical information, such as life span, electrical consumptions, maintenance
and repair costs are adjusted from time to time, depend on the information received
different sources and users of equipment.
The objective of the depreciation schedule is to recover the initial investment
cost of equipment each year over its economic life (Miyata, 1980).Straight-
line method assumes that the value of the equipment reduces at a constant
rate for each year over its economic life. The straight-line method is the
simplest way for estimating depreciation costs and may be most preferable
method to calculate equipment cost per unit of time (Miyata, 1980).
Depreciation cost of different machines
No Machine type Life span Machine Depreciation Usage Total
(year) Price values /hr Time depreciation
Value
Birr Cents Birr Cents Birr Cents
1.Arc welding machine 8 20,000 00 0 72 19:10 11 30
2.Potable grinder 3 5,000 00 0 24 28:00 0 20
3
3.Lathe machine 10 150,00 00 5 47 5:10 104 85
4 0
4.Drilling machine 10 100,00 00 3 65 1:50 7 30
5 0
Total Cost 302 30
Operational and process cost
Labor cost for manufacturing
It is the cost of the worker spend and making a product. The cost includes all
the labor from the time materials are first handle to the time the product is
finished.
Note :- The group members are agreed about a labor cost should have paid
75.00 Birr per hour.
For all components, our project labor cost is indicated as follows
Manufacturing Labor cost
No Parts of Qty Operation Workin Payment Labor Total
name to be g cost of
per hour cost
made part
time in price
in Birr
minute in Birr
Measuring & cutting 0:30 73 56.25 262.50
to size
Shafts 03
Facing on both side 0:30 73 37.50
1
Turning and 0:40 73 50
Chamfering
Milling a key way 1:00 73 118.75
Facing on the other 0:35 75 43.75 218.75
side
Turning a hub and 0:45 75 56.25
2 Pulley 04
Chamfering
Drilling 0:35 75 43.75
Milling a key way 1:00 75 75
3 Measuring & cutting 3:30 75 262.50 681.25
to size
Base 01
Fit the align position 1:15 75 93.75
and Check the angle
Welding set up part 2:50 75 212.50
and avoid the slag
Finishing 1:30 75 112.50
Measuring & cutting 0:10 75 106.25 562.50
to size
Sieve
align the angle iron 0:30 75 100
4 01
in to the position and
Check the angle
welding the correct 0:15 75 93.75
angle
welding the flat iron 0:10 73 112.50
in to the angle iron
Finishing 1:00 75 75
Total 1875.00
Labor cost for assembling components
Detail assembling of manufacturing components is indicated in section
manufacturing process
To the total cost of labor, we should calculate the time spend for
manufacturing &assembling of parts (components) of the project.
The time needed for assembling components of our project is indicated as
follows:-
Assembling labor cost
No Types of assembly Method of Working Payment Labor cost
Assembling time in per hour price in Birr
hour in Birr
1 Assembling of bearing with Manual 0:20 73 75
driver shaft
2 Assembling of pulley with shaft Manual 0:20 75 37.50
3 Assembling of driver shaft with Bolting 0:20 75 62.50
belt
4 Assembling of base with motor Welding 0:20 75 68.75
and Bolting
5 Assembling of base with main Manual 0:30 75 56.25
house
6 Assembling of house and Manual 1:00 75 75
hopper
7 Assembling of belt with motor Manual 1:05 75 81.25
and the shaft
8 Assembling of cover with base Welding 1:20 75 100
Total cost 556.25
Total Labor Cost = Labor cost for manufacturing components + Labor cost
for assembling Components.
= 1875 Birr +556.25 Birr
Total Labor Cost =2431.25Birr
Indirect cost
A cost or expense that is not directly traceable to a product, activity,
customer, etc. As a result indirect costs and expenses are often allocated to
the product. For example, a manufacturing department that molds plastic
has some costs that are directly traceable to it, such as the wages and fringe
benefits of the direct labor working exclusively in that department. However,
the heat for the entire building appears only on one utility bill. The heating
bill is an indirect cost to the molding department.
Generally, it will be assigned to all departments based on the number of
square feet each department occupies.
Administration cost = materials cost x 1%
= (9800x1%)
=98birr.
Economic feasibility
It is important that the designer develops skills in estimating costs of designs
in order to secure the most economic features. This entails being aware of
the breakdown of products cost and the various cost stops that exist in an
organization. These have to be broken down in to individual units to
calculate the overall cost of the product .to put together these individual
costs but they can be represented by three basic costs which are:- material
cost, labor costs, power costs.
1. Material costs
The material costs are refer to those materials which are consumed to
produce a real components of the machine and the standard item costs are
those costs which is purchased from a local markets.
2. Labor cost for manufacturing
It is the cost of the worker spend and making a product. The cost includes all
the labor from the time materials are first handle to the time the product is
finished.
3. Electrical power consumption cost
It is the cost of electric power needed to machine and weld parts of the
project. Electric power is expressed (measured) by a unit watt (w) or kilo
watt (Kw). The cost of electric power is expressed in birr per KWH.
Total estimated cost breakdown of coffee roasting and grinding
machine
Manufacturing cost =
Material cost ----------------------- = 9800Birr
Labor cost -------------------------- = 2431.25
Electric power consumption cost =118.40Birr
Machine depreciation cost = 302.30Birr
Manufacturing cost =12651.955 Birr
Contingencies: - it is compensation due to some errors and unexpected
failure of time in our project it is usually taken as 10% of the manufacturing
cost.
10 x 112651.95 Birr
Contingency =
100
= 1266.95Birr
Total manufacturing cost= Manufacturing cost + Contingency
= 12651.95Birr+1266.95 Birr = 13,917.95 Birr.
ii. Cost-Benefit Analysis
Initial investment in design and fabrication will be offset by:
Lower operational costs compared to imports.
Enhanced output levels leading to higher profitability.
Long-term sustainability benefiting farmers and processors.
