Cost of Production(3)

8/7/2019 Cost of Production(3)

1/39


2/39

Presented To:

Mr. Rana Shahzad

Presented By:

Hamid Javed (082405)

Umair Ali khan(091415)

Umair Rana (081157)Usman Pervaiz (081155)

Qasim Ali (073166)


3/39

ObservationDuring observing markets in Lahore, We found thatPrices of yarn increasing day by day as increase in Costof Production.


4/39

PROBLEM STATEMENT

yWhat Factors are responsible forvariation in cost of production?


5/39

Preliminary Data Gathering: (PDG)

Industries are producing many products and exporting them

to all over the world.But due to recent Inflation in Pakistan the Cost of Productionis at its Boom level.

Our research is focus on Textile Product Yarn.


6/39


(Literature Review)

We observed data from Literature survey from manysources

(1)www.fbr.gov.pkIt tells us about increasing Tax Rates. Sales Tax is 16%in 2010-11 that was 15%. Many Exempted Things arenow Taxable. High ImportDuty.

(2) www.brecorder.comWe found Raw Material Prices, Power & Fuel,Taxations etc. (Cotton Price is Rs. 9500/Mund on 6-10-2010 that was Rs. 2500 in 2009-10. Polyester Prices Rs.

157/Kg today. It was 125/KG in 2009(Petrol, Electricity


7/39


Through InterviewsGhazi Fabrics International Limited Head Office islocated

8-C, Block E-III,Gulberg III, Lahore - 54660. PakistanPh: (92-42) 576 4026-8 (3 lines)Fax: (92-42) 576 4032

-


8/39

Some References

Sr # Name Designation Cell Number

1 Mr. Muzamil Tahir Finance Manager (Chiniot Textile) 03224386478

2Muhammad Abid

Hanif

Chief Accountant (Ghazi Fabrics Int) 03217515207

3 Mr. Ali Sattar Accountant (Chiniot Textile Mills Ltd) 03228075723

4 Mr. Ayaz Sb

Mill Manager

Production & Operations (Chiniot

Textile)

------

5 Mr. Sidique Sb Marketing Manager (Chiniot Tex) -------


9/39

Dependent Variable

Cost of Production


10/39

Independent Variables1. - Raw Material Prices2. - Inflation

3. - Depreciation Rate4. - Utility Bill Prices (Electricity, Fuel, SuiGas,

Petroleum)5. - No of Labor Workers6. - Govt. Policies7. - TaxRates

8. - Quality ofRaw Material9. - Facility Arrangement10. - Technology11. - IMF Policies

12. Load shedding


11/39

Independent Variables(Prioritized)

1. - Utility Bills

2. - Labor Workers

3. - Raw Material Prices

4. - Technology


12/39

MODERATING VARIABLES

1. Inflation2. IMF Policies


13/39

Theoretical Framework

Cost ofProduction

Raw Material

Prices

Utility Bills

Labor

Workers

Technology

Inflation

IMF Policy


14/39

Nature And Direction

Raw Material Prices (Direct) +

Utility Bills (Direct) +

Cost of

Production Labor Workers (Direct) +

(D

irect)

Technology (Indirect) -


15/39

Logical Statements

-If Raw Material prices increase then theCost of Production will increase.

-If Utility Bills increase then the Cost ofProduction will also increase.

-If Number of labor workers increases thenthe Cost of Production will increase.

-If Industry use Low technology then cost ofProduction will increase.


16/39

Research Design-PURPOSE OF STUDY

EXPLORATORY (Pure)

-TYPE OF INVESTIGATION

NON CAUSAL (Correlational)

-STUDYSETTING

NON-CONTRIEVED (Natural) (Field Studies)


17/39

Research Design-TIME HORIZON

Longitu

dinal(Time Varies)-UNIT OF ANALYSIS

Individual

-EXTENT OF INTERFERENCEMinimal


18/39

OUR STAKE HOLDERS

y Ghazi Fabrics International Limited

y LESCO

yWAPDAy Raw Material Parties


19/39

Samplingy Non probability sampling is used due to time and capital

constraint.

y In Non prob. Sampling, QUOTA SAMPLING is used.The area in which research is conducted is Lahore.Completing 45 samples, we have made Three quotas,

1 Textile Industry (Ghazi Fabrics)

2 Raw Material Parties (Cotton/Polyester Parties)

3 Fuel Provide Companies(WAPDA,SUI GAS, LESCO)

y

15 samples from Fuel Provider Co., 15 from Raw MaterialParties and 15 from industry Employees.


20/39

Analysis ofquestionnaire


21/39

Introductiony I am a student of Pak-Aims INSTITUTE OF MANAGEMENT

SCIENCES (IMS), completing my MBA. I am conducting this

research to complete my academic exercise. I am conducting aresearch on Cost of Production to investigate that what factors areresponsible for variation of Cost of Production? I am trying to findout the key contributing factors of this problem by this particularresearch.

Your contribution by providing precious information regarding thatspecific research will be highly appreciated. This research will also be

very useful for you to boost up moral values of people and itsresponsibility of every person to respond effectively. After finding

specific results of this research, your industries can manage longterm decision making towards overall profit of the organizations andminimize of cost. This information given by youwill only be used forthis research and will remain as highly confidential.

y The results of this specific research will be provided to you through

e-mail if youwilling to know about the findings & results.


22/39

Utility Bills PricesThe Prices ofUtilitybills (Sui Gas, Electricity) are.

80%

13%

7%

High

Average

Low


23/39

Utility Bills PricesIMF Policyabout increasing Utilitybills is fair.

27%

60%

13%YES

NO

No Idea


24/39

Raw Material PricesInflation affecting prices ofRaw material.

87%

6%

7% Yes

No

No Idea


25/39

Raw Material Prices

The prices of raw Materials not remain constantwithPassage of time.

67%

27%

6% Yes

No

No Idea


26/39

Labor Workers

You think that Labor Cost is affordable.

27%

53%

20%

Yes

No

Sometimes


27/39

Labor Workers

In your opinion, that Laborwages are high due to

27%

20%

40% 13%

Inflation

Availability ofLabor

Labor Policy

Competition


28/39

TechnologyYou are using latest Technology in the production department.

27%53%

20% Yes

S metimes


29/39

The Technology you are using is enough for manufacturing.

Technology

20%53%

27%

Yes

No

No Idea


30/39

Analysis & Interpretationy

80 % Employees of LESCO & Wapda said thatthe prices ofutility bills are very high

y 60% Empolyees of LESCO & Wapda said thatIMF policy regarding Utility prices is not fair.

y 87% Raw Material Parties said that inflation isaffecting prices of Raw material.

y 67% Raw Material Parties said that prices are

not constant with time to time.y 53% Employees of Textile Industry said that

Labor cost is not affordable.


31/39

Analysis & Interpretationy

40% employees of the Textile Industry said thatLabor cost is increasing due to Govt Policy regarding labor.

y 53% Employees of The Textile Industry said that

they are not using Latest Technology for itsproduction process.

y 53% Employees of The Textile Industry said that

they have not enough technology for theProduction Process.


32/39

Results & Findingsy

Most employees of LESCO and WAPDA think that theprices ofutility bills are increasing day by day that isdirectly effecting Textile Industries.

y IMF Policies are also leaving bad effects on many

industries specially Textile Industry. So This leadsindirectly to Cost of production High.

y The Parties of Raw Material are in favor of thisresearch and said that inflation is increasing day by

day that is directly effecting prices of many produ

cts.y The prices are not same. If one product is having price

8000 per mund then next day it manyup by 10000 permund.


33/39

Results & Findingsy

Industry Employees think that Labor cost is very highand is not affordable.

y Govt. policies is directly effecting High Labor cost thatis leading to high Cost of Production.

y Some Employees think that they Have not Latesttechnology in the country thats why they could notoperate production process efficiently.

y Many Employees are in favor of Technology they think

that they should have enough technology to run theoperations correctly. So they have not enoughTechnology. So their Cost of Production is very High.


34/39

yAfter findings all the Independent Variables aredirectly affecting Cost of Production.


35/39

Recommendationy Industries should purchase more raw material when prices

are very low and keep maximum stock of low priced RawMaterial.

y In order to minimize Cost of Production industry shouldminimize the utilization of Labor workforce. The workforceshould be given proper training to become eligible forproduction operations.

y Industry should buy latest technology for the productionprocess. It should open education institution that willeducate people who will make technology themselves infuture rather than they import it.

y They should minimize Electricity and Gas. They shouldOFF Air conditions etc when there is not need. They shouldshout down extra machines in the Factory.


36/39

Research Limitation & Constraintsy TI

ME LIM

ITA

TIO

N:---Time was the major factor inconducting result.

y LOW CORDINATION:-- Some stack holdersemployees dont coordinate thats why we could not

got enough information.y LIMITED ACCESIBILITY:--Individuals were not

ready to give us the full access to the information.

y INDIVIDUAL BEHAVIOR:--Individual behavior of

some of the employees was not satisfactory and it wasdifficult to gather information from these.

y RESOURCE CONSTRAINT:---Not enoughResources to conduct research.


37/39

Method Used to Analyze Data

yMicrosoft Excel

ySPSS Software


38/39

Hallmarksy PURPOSIVENESS

Ou

r Pu

rpose is to complete the Academic Project that is on theVariation in Cost of Production factors.

y OBJECTIVITY

From literature Survey we found that 150% (approx..) increasein Cost of Production from previous year.

In simple words Cost of Production has increased from pastyear from our findings.

y CONFIDENCE

We have confidence as a researcher what we have done in orderto conduct this research is accurate.


39/39

Some Interesting Findings

y Cost of Production is also hidden nature. Some factorsalways remain hidden in the production like waste fromcotton etc..that is actually increasing cost of Production.

y Capacity of Machines that are not working well candecrease the production process.

y Inefficiency of labor can increase the cost of production.

Documents

Cost of Production(3)