6.
Analysis of Production Costs
Production Cost Breakdown
There are many Qureshi Flour Mill products, like as Qureshi Atta, Chakki Atta, and Farina Fine
Atta and are characterized by three types of production costs: fixed, variable, or marginal.
1. Fixed amount:
• Machines & Equipment: QFM uses Latest, very precise milling technology. Though they need a
great initial investment, these assets keep fixed maintenance expenses independent of output
level.
• Factory Payments: Expenses are connected to the Korangi and Port Qasim facilities include
insurance premiums, rent or ownership costs, salaries for permanent workers (management,
administration, human resources, quality control).
• Not Proper Utilities: The plants have to use a certain amount of water and electricity to stay
alive, even when they are not making much.
2. Variable Cost
• Raw Material (Wheat): It’s the most expensive item, it is most sensitive to make changes in
market values, make variations in supply during the year, and government trade policies.
• Packaging: Luxury substitutes, which are made up of paper so that can be closed and opened
again simply, could help people to know the brand better. However, they cost more than the
polypropylene packaging and it is used, which is simple but cheap.
• Transportation and Distribution: Providing fuel to wholesale and retail businesses, maintaining
trucks in top condition, and outsourcing logistics.
• Sales Incentives: Trade discounts, retail margins, and marketing initiatives all are contributed
to variable expenses related to sales incentives.
3. Additional Costs
These are the extra expenses, are mostly related to wheat, packaging, and shipping—that go
into making and selling one more item. For QFM's big groups, after fixed costs are paid and
marginal costs are quite low.
Numerical cost breakdown:
Problems with Cost Management
•The Fluctuations in raw material prices: The total price per unit is highly affected in yearly
changes in wheat prices up to 30–40%.
• Strong Market Competition: The flour market in Karachi is extremely price-sensitive, and even
if a miner price increase can send customers to less expensive substitutes.
• Limited Retail Economies of Scale: Even if in wholesale advantages from size and lesser
package volumes raise per-unit pricing.
• Trust on outsourced marketing: Agency are costs cause in increased above and decrease the
response times.
• Continuous Tech Funding: While better equipment raises the quality and it calls for ongoing
financial support.
Methods Used for cost cuts:
• Long-term wheat supply contracts: It have preserved profit margins and raw material costs.
• In-House Creative Team: This Reduces design and marketing firm costs.
• Increasing perceived value without any considerably increasing costs is achieved by packaging
optimization with using expensive, affordable, and economically friendly designs.
• Logistics Optimization: This Route-planning tools help to lower fuel expenses and delivery
time.
• Demand-Based Production Planning: It helps cut overproduction and the storage losses.
Effects on Market Place and Profitability:
• When limits are kept under control, they can increase. Which could make Farina Atta’s
position as a "rationally priced best" option possible and This strategy can allow for marketing
and competitive pricing investments.
• Uncontrolled: The rising input cost can decrease profitability and can make it more tough to
compete with less expensive competitors if there is no pricing flexibility.
7.Methodology
Research strategies
This study combined original qualitative research supported by secondary market data.
1. Original Research
• Naturalistic Observation: We observed households while Farina Fine Atta prepares rotis and
parathas.
• Semi-structured interviews: There were encouraged conversations about packaging, flavor,
texture, and preparation experience.
• Field Notes: Every visit includes very extensive notes documenting observation
2. Participants and Sampling:
To guarantee of a range of atta consumption habits and this sampling approach called
purposive sampling is used.
• Sample Size: Clifton, North Nazimabad, and Gulshan-e-Iqbal have three houses.
• Household sketches:
A: Users of whole chakki atta
B: fine atta mixed with chakki
C: paratha all-purpose flour and chakki for rotis
3. Restrictions on Data Availability
Simple and flexible dough kneading, cooking results (taste, softness, and puffing), freshness and
smell perception, packaging usability, and brand awareness and purchase intent.
4. Other Sources
• Industry statistics: Nielsen, FAO, IBEF publications;
• Market size: Pakistan Flour Mills Association, Grand View Research, statistics;
Understanding rivalries: online retail inventories
Data Analysis
The thematic analysis is the process of grouping recurring themes in comments—such as "easy
kneading" or "needs improved packaging."
Directing is the procedure of matching results with data from interviews and the business.
Result focus on: Giving useful improvements in product placement to give high priority.
Appendix (Outline of the Questions Asked):
1. What are the main fixed and variable expenses involved in the production of Farina Atta?
2. What impact do seasonal variations in wheat prices have on production scheduling?
3. How are fuel and electricity expenses managed?
4. What impact does cost control have on pricing choices?
5. Which methods have worked best to keep production costs under control?
6. How does the business's cost position stand up against competitors?
