Business Expansion

Topics: Costs, Variable cost, Fixed cost Pages: 16 (4377 words) Published: March 1, 2013
The aim of this project is to advise an existing company on a number of issues relevant to the expansion of its business. The company that we had to advise is Cottontex, specialised in men’s and women’s blouses, shirts and trousers. Cottontex has the idea to expense it’s business with a skirt collection. To advise Cottontex the best as possible we first had to investigate if it would be realistic to expend the business of Cottontex. We had to set up a new production facility, which includes issues related to the expansion of the production facility. We also had to calculate what the cost will be for Cottontex, if they would expand their business.

The starting point of the project is the product. The required product is a straight cotton skirt in a dark blue colour. To gain more knowledge about the specifications of the skirt, a technical model specification and a general model specification are required. In the technical model specification the model description, sizes, details, seam types and the condition of delivery can be found. In the general specification model can be found a sample of the fabric and thread, an overview of the haberdashery used for the skirt and the washing instructions. The total operational time of the skirt is calculated in centiminutes. 1 Centiminute is equal to 0.01 minute. The operational time to produce a skirt is 384 centiminutes, this means that it will take 3.84 minutes to produce one single skirt. All the production lines have to be balanced like in a big puzzle, where all the pieces have to fit into each other to get a good looking end result. Balancing loss of time could happen because during a whole working day some problems can occur, which makes that the successive production times of all the actions vary. When we speak about 'Balancing' we mean the interactions between people and machines, which have to bring the highest possible production rate and a as low as possible delay, what is called 'Balancing loss of time' In this case the company produces 450,000 approved skirts every year. To realise the planned production rate of the skirts, a particular figure of workstations is needed. The required minimum number of workstations is around 29. Therefore, at this moment 40 employees are required for the production. To reach a production rate of 450,000 approved skirts a year all the employees together should actually work in total 45,213 hours a year. This means that one single employee has to efficiently work 1,130 hours every year. For the production over locking machines, lockstitch machines, pressing machines and a buttonhole machines are needed. Overall, the total number of machines is 40, on which 40 dressmakers are working. To know if the production of the collection of skirts is profitable, it is very important that all the costs of the project are known. The aim is to give a calculation of the standard cost price of one skirt. When the standard cost price is known, it is possible to add a gross profit margin and to determine the commercial selling price of the skirt. The total costs of the production consist of variable- and fixed costs. The variable costs for producing the skirt consist in this case only of the total raw material costs and the standard labour costs. The raw material costs and standard labour costs are variable because the amount will change at a greater or smaller production. Concerning the raw material costs, waste and scrap are taken into account. The total labour costs include gross wages including holiday bonuses, indirect expenses such as gratuities, allowances for shift work, cost of work clothes and employer charges. To know the variable costs of one single skirt, it is necessary to divide the total variable costs by the estimated approved production volume.

The constant costs consist of rent and other constant costs like paid interest, depreciation of transport tools and other work tools, direct personnel expenses, indirect...
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