UNIVERSITAS INDONESIA

Fortified Biocharcoal to Increase Fruit Production

Report Assignment 4

GROUP 09

GROUP PERSONNEL:
FIRDANIA FAUZIAH (1606837221)
IMANUEL BAGAS SUGIARTO (1606839302)
JESSICA (1606883064)
MIRANDA MEIDISTIRA (1606889585)
MUHAMMAD JIHADILAN ALIANSYAH P. (1606905286)
SEPTIANA CRISTA DEBORA (1606836061)

CHEMICAL ENGINEERING DEPARTMENT

ENGINEERING FACULTY
DEPOK
MAY 2019

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 EXCECUTIVE SUMMARY

A precise economic analysis of Biocharming product is needed to be done

to determine whether the product will be successful in the market or not. The
market analysis is conducted based on cost calculation of supply chain and
distribution area, total capital investment, operational cost, economic analysis, and
profitable analysis. The success of its market is illustrated through the net present
value (NPV), internal rate of return (IRR), return of investment (ROI), and
payback period (PBP).

The supply chain of PT. Biocharming is obtained from various sources.

Copper, zinc, and biocharcoal is obtained from main supplier in China while the
rest is obtained from supplier in Indonesia. This decision is based on product and
shipping cost, the determination of shipping period and availibility. Biocharming
plant will be manufacturing two products. They are biocharcoal with optimum
production capacity of 12260 units and foliar with optimum production capacity
of 238406 units of 10 Liter each. To fulfill and guarantee this raw material
demand, a raw material order scheduling is determined which can be seen in
chapter 1.3. The final product of Biocharming is distributed to local distributor of
fertilizer in Malang. It is planned that the products will be distributed monthly to 6
distributors from Kebomas by trucks which are provided by an expedition
company. Meanwhile, market strategy is needed to reach the target customer and
forecasted to be done through magazine, website, billboard, and so on with cost
estimated around Rp 41,092,580.

The calculation of total capital investment is done by adding fixed cost,

both direct and indirect, and working capital. The direct cost is estimated to cost
Rp 11,782,731,000 while the indirect cost is estimated to cost Rp 2,108,086,830.
So, the total fixed cost is Rp13,890,817,830. As a petrochemical industry, it is
calculated by assuming 15% of fixed cost capital added by 10% of contractor fees.
The working capital of Biocharming plant is Rp2,118,757,455. So, total capital
investment for this product is Rp18,509,992,494. PT. Biocharming operational
cost consists of manufacturing cost, fixed cost, and other expenses called general
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expenses. The operational cost is Rp23,565,059,536 annually. To fulfill the
capital needed PT. Biocharming will use loan from bank whose interest is around
9.95% and is estimated to be returned within 5 years of plant production.

Afterwards, the price of the product is calculated by analyzing the net

present value (NPV) of the cashflow. In a range of 10 years of production, the
minimum product pricing for biocharcoal is Rp 30,000 and foliar is Rp65,000.
The number is obtained by iterating the calculation until the NPV is zero with
MARR value of 11%. The NPV of PT. Biocharming by applying this product
pricing is Rp10,510,767,951 with IRR 24%.

To procure the feasibility of Biocharming product, profitability analysis is

done by calculating ROI, NPV, breakeven point and sensitivity analysis of
Biocharming product. The sensitivity provides an insight to Biocharming product
feasibility due to the change in those variables. It is observed that labor cost is
insignificant to the change of IRR, NPV and PBP. While, the change raw material
is insignificant for NPV and PBP, but its increase contributes to decrease of IRR.
The most significant influence of sensitivity is product price. The increase of
product price cause a bigger value of IRR, increase of NPV, and decrease of PBP.

To summarize, the economic analysis shows that Biocharming

manufacture scheme can be implemented and profitable. The robustness of
Biocharming economy is supported by its insensitivity to raw material and labour
cost. As a result, its product price can be determined arbitarily adjusting to market
condition. More marketing and advertisement strategy should be taken concerned
to expand PT. Biocharming growth.

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 LIST OF CONTENT

EXCECUTIVE SUMMARY 2
LIST OF CONTENT 4
LIST OF FIGURES 7
LIST OF TABLE 8
CHAPTER 1 SUPPLY CHAIN 10
1.1 Supply Chain Management 10
1.2 Plant Location 12
1.3 Raw Material Supply 15
1.3.1 Raw Material Location 15
1.3.2 Alternative Scenarios and Modelling 17
1.3.3 Raw Material Inventory 18
1.3.4 Raw Material Supply Chain 19
1.4 Product Distribution and Inventory 23
1.4.1 Product Distribution Chain 23
1.4.2 Product Inventory 24
1.4.3 Product Distribution Location 25
1.4.4 Distribution Pathway 26
1.4.5 Transportation Method 27
1.5 Product Marketing 29
CHAPTER 2 PRODUCT COSTING 31
2.1 Total Capital Investment (TCI) 31
2.1.1 Direct Cost Estimation 32
2.1.1.1 Equipment Cost 32
2.1.1.2 Land and Building Cost Estimation 37
2.1.1.3 Supporting Facilities Cost Estimation 37
2.1.1.4 Utilities Installation Cost 39
2.1.1.5 Market Research Cost 39
2.1.1.6 Patent and Brand Trademark Cost Estimation 39
2.1.2 Indirect Cost 40
2.1.3 Working Capital 41

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 2.1.4 Total Capital Investment 42
2.2 Operational Cost Estimation 43
2.2.1 Manufacturing Cost 43
2.2.1.1 Raw Material Cost 43
2.2.1.2 Utilities: Electricity and Water 46
2.2.1.3 Maintenance Cost 50
2.2.1.4 Patent and Trademaark 50
2.2.1.5 Safety Cost 52
2.2.1.6 Direct and Indirect Salary 53
2.2.2 Fixed Charge 55
2.2.2.1 Depreciation 55
2.2.2.2 Labor Tax and Insurance 67
2.2.2.3 Building Tax 74
2.2.3 General Expenses 75
2.2.3.1 Communication Expenses 75
2.2.3.2 Marketing Cost 76
2.2.3.3 Distribution Cost 77
2.3 Economic Analysis 79
2.3.1 Product Pricing Per Unit 79
2.3.2 Cash Flow 80
2.3.3 Cost Breakdown 85
CHAPTER 3 PROFITABILITY AND SENSIBILITY ANALYSIS 86
3.1 Return of Investment 86
3.2 Payback Period 86
3.3 Break Even Point 88
3.4 Internal Rate of Return 88
3.5 Net Present Value 89
3.6 Sensitivity Analysis 89
3.6.1 Production Price Fluctuation 90
3.6.2 Raw Material Cost Changes 91
3.6.3 Operational Cost Changes 92
3.7 Fluctuational Graphics 93
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 3.7.1 Internal Rate of Return (IRR) 93
3.7.2 Net Present Value 93
3.7.3 Payback Period 94
CHAPTER 4 CONCLUSION 95
REFERENCES 96

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 LIST OF FIGURES

Figure 1.1. Areal of selected plant of Biocharming Ltd. ..................................... 14

Figure 1.2 Location between plant and Gresik Harbor ........................................ 14
Figure 1.3 Raw Material Inventory ...................................................................... 19
Figure 1.4 Product Distribution Chain ................................................................. 24
Figure 1.5 Product Inventory ............................................................................... 25
Figure 1.6 Distribution Route .............................................................................. 27
Figure 1.5 Fuso Truck .......................................................................................... 28
Figure 2. 1 Before and After Tax Cash Flow ....................................................... 84
Figure 2. 2 Cummulative Cash Flow .................................................................. 84
Figure 2. 3 Cost Breakdown Diagram.................................................................. 85
Figure 3. 1 IRR Graph Fluctuation ..................................................................... 93
Figure 3. 2 NPV Graph Fluctuation .................................................................... 94
Figure 3. 2 Payback Period Graph Fluctuation ................................................... 94

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 LIST OF TABLE
Table 1.1 Distance and Estimate Time to Distributor .......................................... 15
Table 1.2 Raw Material in the First Day Suppliers .............................................. 16
Table 1.3 Raw Material ........................................................................................ 17
Table 1.4 Raw Material Distribution Model ........................................................ 17
Table 1.5 Priority Level for Raw Material and Packaging Supplier .................... 18
Table 1.6 Raw Material Supply Scheduling ......................................................... 19
Table 1.7 Raw Material Supply Scheduling ......................................................... 21
Table 1.8 Percentage of Distribution .................................................................... 25
Table 1.9 Fuso Truck ............................................................................................ 28
Table 1.10 Product Distribution by Truck ............................................................ 28
Table 1.11 Promotion Strategy of Biocharming................................................... 29
Table 2.1 Marshall and Swift Chemical Equipment Index .................................. 33
Table 2.2 Equipment Cost .................................................................................... 36
Table 2.3 Land Cost ............................................................................................. 37
Table 2.4 Building Cost........................................................................................ 37
Table 2.5 Supporting Equipment Cost ................................................................. 38
Table 2.6 Utilities Cost ......................................................................................... 39
Table 2.7 Market Research Activities Cost .......................................................... 39
Table 2.8 Patent Cost............................................................................................ 40
Table 2.9 Brand Cost ............................................................................................ 40
Table 2.10 Brand Cost .......................................................................................... 41
Table 2.11 Fixed Capital Cost .............................................................................. 42
Table 2.12 Total Capital Investment .................................................................... 42
Table 2.1 Raw Material Cost ................................................................................ 44
Table 2.2 Water Usage Estimation ....................................................................... 46
Table 2.3 Water Price for Various Usage............................................................. 46
Table 2.4 Water Price for Production ................................................................... 46
Table 2.3 Equipment power Usage Cost Estimation ............................................ 48
Table 2.4 Support Facilities Power Usage Cost Estimation ................................. 49
Table 2.7 Total Maintenance Estimation ............................................................. 50
Table 2.8 copyright Registration cost................................................................... 51
Table 2.9 Brand Registration cost ........................................................................ 51
Table 2.10 Patent Registration cost ...................................................................... 52
Table 2.11 Safety Cost Estimation ....................................................................... 52
Table 2.12 Direct Labor Salary ............................................................................ 53
Table 2.13 Indirect Labor Salary .......................................................................... 53
Table 2.14 Depreciation of Main Equipment ....................................................... 57
Table 2.15 Depreciation of Supporting Equipment............................................. 60
Table 2.16 Depreciation of Building ................................................................... 64
Table 2.17 Total Depreciation ............................................................................. 66

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Table 2.18 Tax Tarrif .......................................................................................... 67
Table 2.19 Direct Labor Tax and Insurance ........................................................ 68
Table 2.20 Indirect Labor Tax and Insurance ..................................................... 69
Table 2.21 Plant Insurance Based on Depreciation ............................................. 74
Table 2.22 Building Tax Estimation .................................................................... 75
Table 2.23 Building Tax Estimation .................................................................... 75
Table 2.24 Printed Advertisement Cost ............................................................... 76
Table 2.25 Online Media Cost.............................................................................. 77
Table 2.26 Distribution Cost ................................................................................ 78
Table 2.39 Parameter for WACC calculation....................................................... 79
Table 2.40 Minimum and Product Price Table Calculation ................................. 80
Table 2.41 Cash Flow Table ................................................................................. 81
Table 3.1 Cash Flow and Cummulative Cash Flow ............................................. 87
Table 3.2 Break Even Point Calculation .............................................................. 88
Table 3.3 Sensitivity Analysis Product Price (Biochar) ....................................... 90
Table 3.4 Sensitivity Analysis Product Price (Foliar) .......................................... 91
Table 3.5 Sensitivity Analysis Raw Material ....................................................... 92
Table 3.6 Sensitivity Analysis Salary................................................................... 92

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 CHAPTER 1
SUPPLY CHAIN

1.1 Supply Chain Management

Supply chain management (SCM) is the active management of supply chain
activities to maximize costumer value and achieve a sustainable competitive
advantage. It represents a conscious effort by the supply chain firms to develop
and run supply chains in the most effective and efficient ways possible. Supply
chain activities cover everything from product development, sourcing, production,
and logistics, as well as the information systems needed to coordinate these
activities.
In designing and manufacturing a product, marketing system is important
for the cash flow of the plant. Product marketing system or supply chain
management understand how the raw material is brought and obtained until the
distribution of the product of the plant. Procurement management needs to be
integrated with various procurement management from several companies related
to product fulfillment and product distribution. This is intended so that the
performance of the process of procurement of raw materials, and fulfillment of
product needs in the community becomes optimal and maximum.
To achieve supply efficiency, these are several parts of supply chain that
should be identified and managed well, including:
 Planning
This stage compromises of planning the overall process that takes part in
the plant, starting from the raw material supply until the final product is
distributed and is also used to monitor the flow of supply chain whether it
is profitable.
 Production
At this step, the raw materials used for the manufacturing process are
designed according to process requirements for some time until the process
of sending raw materials from the supplier returns. Therefore, the
management of the process and scheduling is made as efficient as possible

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so that meeting consumer needs for the product is not compromised. This
steps also needs to focus on items such as inventory management, quality,

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capacity and the volume of products to be produced in order to meet the

customer need, and it also the techniques of quality control to meet the
required standards of production.

 Distribution
Distribution is the core of the supply chain section. This stage describes
how Biocharming product reaches the customers; including the delivery
time of the product to distributors, the vehicle used, and location of the
distribution.
 Inventory
The demand for products by consumers is not always stable according to
the production capacity carried out, often demand soars but often demand
decreases. Therefore, it is very important to keep the stock optimum to
maintain the value of the product on the market. But there is also the risk
of products exceeding the storage date because it will reduce the
performance of the product.
 Location
The right location selection is intended to reduce the costs of the shipping
process that is carried out from the process of getting the raw materials to
the product distribution process
 Transportation and Information
Transportation is the core of the supply chain section. This stage describes
how the product reaches the customers; including the delivery time of the
product to distributors, the vehicle used, and location of the distribution.
Creating innovation requires good organization of information. Computers
and software provide important valuable assists in the achievement of the
objectives, but it remains important to conduct regular business process
analysis and eliminate any redundancies or duplication of effort.
1.2 Plant Location
Plant location is important aspect to keep sustainability of the plant
production. An ideal plant location will minimize the distribution cost and
maximize effectiveness. There are some considerations in determining the plant

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location for this fertilizer production. The plant is in area which land is wide
enough to expansion possibility. There are some things to consider finding the
best location for constructing a plant, such as:
1. Regulations imposed by the local government
Regulation ensure the stability of Biocharming business, so the rules of the
local government must be followed. The purpose is to ensure continuity
and legality of the business.
2. Infrastructures
A good plant is surrounded with good supporting infrastructure, such as
electricity, water, banking, public utilities, civil amenities and means of
communication are important to ensure the plant runs smoothly.
3. Environmental condition
Plant location must not disturb living environment in terms of water, air,
and sound pollutions. Environment aspect also include climate, low risk of
natural disaster, and safety environment for labors.
4. Access
The plant has good access so that can be easily accessed for transportation
of the raw material and distribution of the product to reduce cost.
Approachability to railway station, airport, or harbor which gives the most
affordable costs.
5. Labors
The availability of the labor is important for the plant, as they are needed
to operate all the process of the production.
Based on the consideration aspect above, the plant will be in Kebo mas,
Gresik. The available space is 1.55 ha. This location is close to labor source so it
will help to operate all production process. This area is in an industrial area that s
recommended by the local government so that there will be no problems with land
permits. This land is also close to the port of Gresik only 5 km which facilitates
the transportation and distribution of raw material for several other regions. Factor
reports can be seen from the picture below.

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Figure 1.1. Areal of selected plant of Biocharming Ltd.

(Source: earth.google.com)

More detailed explanation of Biocharming selected plant location is as follows:

 The location is 5 km away from Gresik Harbor, which will be
Biocharming main port for distribution of the raw materials. The estimated
time for raw materials to be transported from Gresik Harbor to
Biocharming plants is around 24 minutes by truck.

Figure 1.2 Location between plant and Gresik Harbor

(Source: earth.google.com)

 The range time from Biocharming plant to reach a few potential

distributors that looks potential market. There are six distributors spread
across several regions in Malang, Surabaya, Gresik is listed in table below.
This distributor is chosen because the distributor has market surround
Malang. Malang is potential city that using fertilizer.

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Table 1.1 Distance and Estimate Time to Distributor

Estimated Time Distance
Destination Address
(minutes) (km)
Jl. Raya Krebet No. 23 Bululawang,
Distributor 1 197 122
Malang
Jl. Aris Munandar No.53,
Distributor 2 169 110
Kiduldalem, Klojen, Malang
Jl. Panglima Sudirman Utara No.37,
Distributor 3 164 108
Rampal Celaket, Klojen Malang
Jl. Villa Bukit Mas Paris Elok SB
Distributor 4 47 22
No. 37 Surabaya
Gedung Graha Sarana Lt. 6 Jl. A.
Distributor 5 16 6
Yani, Gresik
Gedung Yosindo Lt. 5 Jl. Rajawali
Distributor 6 39 16
84 Surabaya
(Source: google.co.id/maps (Reproduced))
The estimated time above is calculated in the midnight time. The data above
are given for the central location of each distributors spread across several regions
in Malang. More detailed location of the distribution place will be explained in
latter part of this report.
1.3 Raw Material Supply
Distribution of raw material is an essential thing that needs to be considered,
dure to its core role in manufacturing a product. The raw materials used in the
manufacturing process in the factory are very important, so it is necessary to
estimate the time needed for shipping, quantity, to the influence of the availability
of raw materials in the manufacturing process of the product.
1.3.1 Raw Material Location
Raw material is the first and main concern in product manufacturing.
Ideally, the raw materials should be easy to obtain. In the other word, the source
of raw material should be as near as possible to the plant. This is intended for
reduce management cost of the supply chain process. The raw materials used in
this process are taken from several suppliers outside Indonesia, so that raw
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materials are imported. Supplier selection is based on raw material specifications,

supplier credibility, and time spent in shipping.
Table 1.2. below list the suppliers of the raw materials. The manufacture
will produce 0.336 tons fertilizer each day and there each process need 95 kg
KNO3, 1 kg Cu, and 1 kg Zn.

Table 1.2 Raw Material in the First Day Suppliers

Plant’s Necessities
Raw Composition
(kg/day or Supplier I Supplier II
Materials (%wt)
cbm/day)
PT. Saprotan PT. Meroke
KNO3 41% 285
Utama Tetap Jaya

Xiamen Vastland
Cu 4% 28.5 -
Chemical Co., Ltd.

Xiamen Vastland
Zn 4% 28.5 -
Chemical Co., Ltd.

PDAM Giri Tirta PDAM

water 10% 70.908
Gresik Surabaya

Zhongchuan
PT.
Chemical
Biocharcoal 41% 285 Monotaro
Technology Co.,
Indonesia
Ltd.

Table 1.3. lists the suppliers for the container’s material. The product from
this factory is divided into two parts, solid fertilizer, a little liquid fertilizer, and
the remaining liquid from the impregnation is reused for the next process the next
day. Solid fertilizer is packaged in woven bags and liquid fertilizer is packaged in
small bottles. Woven bags and small bottles purchased from existing suppliers can
be seen from table 1.3.

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Table 1.3 Raw Material

Plant’s
Raw Material Necessities Supplier I Supplier II
(unit/day)

Woven Bag 37 Jiangnan Ltd. Xinfeng Ltd.

PT. Monotaro
Small Bottle 10 L 712 Artya Jaya Packaging
Indonesia

Second supplier is chosen by same criteria with first supplier. Second

supplier is needed for back up if there is a problem with the first supplier.
1.3.2 Alternative Scenarios and Modelling
After selecting two suppliers the raw material is selected 1 based on the
price of the cheapest raw material of the highest quality and reducing costs
because of the close distance.
Table 1.4 Raw Material Distribution Model
Supplier I Supplier II
Raw
Distance Transportation Price Distance Transportation Price
Material
(km) fee (IDR/kg) (IDR/kg) (km) fee (IDR/kg) (IDR/kg)

KNO3 326.6 100,000.00 25,000.00 795 27,000.00 25,000.00

Cu 4195 90,000.00 14,500.00 - - -
Zn 4195 90,000.00 14,500.00 - - -
Biocharcoal 4195 90,000.00 18,000.00 - - -

Water 5 - 5,000.00 20.3 - 7,500.00

Woven
40.5 250,000.00 6,500.00 4195 90,000.00 1,500.00
Bags
Small
825 12,000.00 27,000.00 795 27,000.00 50,000.00
Bottle

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From the parameters above, first supplier priority to supply all of the
materials. The main concern for having more than one supplier is as a backup, in
case one supplier cannot fulfill the requirement. Distance parameter have
significant impact of time of shipping the raw material. From the table above, raw
material supplier located in Chine. Form Chine will have similar shipment time to
Indonesia (14 days, more or less).
Table 1.5 Priority Level for Raw Material and Packaging Supplier
Raw Materials First Priority Supplier Second Priority Supplier
KNO3 PT. Saprotan Utama PT. Meroke Tetap Jaya
Xiamen Vastland Chemical
Cu -
Co., Ltd.
Xiamen Vastland Chemical
Zn -
Co., Ltd.
Zhongchuang Xingyuan
Biocharcoal Chemical Technology Co., -
Ltd.
Woven Bag Lim Corpotation Jiangnan Ltd.
Small Bottle 500ml Artya Jaya Packaging PT. Monotaro Indonesia

1.3.3 Raw Material Inventory

Some of the raw material will be arrived in every month and some will be
arrived on the first week of the next month or around last date of the month.
After determining the timeline or schedule of raw material (including
packaging) order, graphs of the raw material inventory can be created based on
the raw material supply and usage each day. Figure below show the raw materials
inventory per month.
Raw materials ordered from suppliers is made to meet the production
capacity for one month. This will reduce the management of raw material
distribution costs from suppliers. The assumption used is that there are no
problems that occur during delivery from suppliers so that the receipt of goods is
maintained as planned.

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RAW MATERIAL INVENTORY

30000.0

Quantity (kg/cbm/unit)
25000.0
20000.0
15000.0
10000.0
5000.0
0.0
15
29
43
57
71
85
99
1

113
127
141
155
169
183
197
211
225
239
253
267
281
295
309
323
337
351
Day

KNO3 Cu Zn Biocharcoal
Water Woven Bags Bottle 10L

Figure 1.3 Raw Material Inventory

1.3.4 Raw Material Supply Chain

All raw materials needed for manufacturing process will be delivered from
overseas suppliers. Supplier in China is chosen for the availability of the raw
material. Solid fertilizer packaging materials are imported from China because of
the quality specifications of the material sought, while small bottles are purchased
from companies in Indonesia, so the raw materials are easy to be delivered.
The time needed to deliver the raw material to the plant is assumed
without any problem on the trip. Anticipation delay constraints that occur in the
delivery of raw materials, the purchase of raw materials is exceeded as much as
10% on the first purchase to become stock. Interval of order raw materials is
frequented, which is every once a month, to also prevent excessive stocks that
may cause destruction of raw materials and taking a lot of space. The first
suppliers already choose has availability of raw materials with great the
specification, credibility of suppliers, the distance, and the time needed for the
delivery.
Table 1.6 Raw Material Supply Scheduling
Delivery Next
Raw Interval of Total Order First Time
Time Order in a Unit
Material Order (Day) (Unit) Order
(Day) year

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Woven Bag 730 1 25000 25000 0 Pieces

KNO3 30 0 2494 2494 1,710 Kg

Table 1.6 Raw Material Supply Scheduling (continued)
Raw Material Interval of Order Delivery Total Order First Time Next Order Unit
(Day) Time (Day) (Unit) Order in a year

Cu 30 20 855 884.5 679 Kg

Zn 30 20 882 882.3 677 Kg

Biocharcoal 30 20 10688 10678.5 8,265 Kg

Water 30 0 350 349.6 209 cbm

Small Bottle 30 0 26700 26700 20,648 Pieces

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Table 1.7 Raw Material Supply Scheduling

January Ferbuary March April May June
Raw Material Schedule 0 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
Ordering
Woven Bag Consuming
Arrival
Ordering
KNO3 Consuming
Arrival
Ordering
Cu Consuming
Arrival
Ordering
Zn Consuming
Arrival
Ordering
Biocharcoal Consuming
Arrival
Ordering
Small Bottle Consuming
Arrival

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Table 1.7 Raw Material Supply Scheduling (continued)

August September October November December
Raw Material Schedule 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
Ordering
Woven Bag Consuming
Arrival
Ordering
KNO3 Consuming
Arrival
Ordering
Cu Consuming
Arrival
Ordering
Zn Consuming
Arrival
Ordering
Biocharcoal Consuming
Arrival
Ordering
Small Bottle Consuming
Arrival

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1.4 Product Distribution and Inventory

Indonesia is an archipelago which have island lined across from Sumatra to
Papua. Furthermore, Indonesia is also a developing country which the people still
have an unstable economic status. According to the Boston Consulting Group on
2013 analysis, there is only 52,6% of Indonesian citizen that live above the
economic standards. Therefore, the economic distribution in Indonesia country is
not equal in every island.
Product distribution and inventory is an important part in the management
of supply chain. In this part, the movement of the final product from the
manufacture to the customer is arranged. Its goal is to improve the relation among
all the parties involved, thus improving inventory’s visibility and the velocity of
its movement.
Considering the facts that this product is still a startup product and has got
little awareness in the market, it is important to start in a few distributors in
Malang, Surabaya, and Gresik that have supply fertilizer in Malang. Malang is the
biggest potential market that using fertilizer especially for fruit plant. With the
assumption that every people will change their fertilizer to Biocharming. Malang
City will be the first market for this product. Then several other cities around East
Java will become the next market until all of Indonesia gets the supply of this
product.
1.4.1 Product Distribution Chain
The distribution of Biocharming is simple. After manufacturing process, it
is stored in the warehouse inside the plant. Then the product will be shipped to
distributors in destined cities every month. The block diagram for Biocharming
distribution chain is shown in the figure below.
Product distribution starts from products that come out of the factory and
will be sent directly to the central distributor around Gresik, Surabaya, and
Malang. This distributor will send and distribute products to village retailers and
cooperatives so that consumers can buy them from small retailers

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Shipping
Manufacturing Warehouse
System

Distributor

Customer

Figure 1.4 Product Distribution Chain

1.4.2 Product Inventory

Products produced every day are put into the warehouse and then shipped
in large quantities. Therefore, the products produced by the factory are collected
for one month and then distributed at the end of the month. Products in the
warehouse are maintained so that fluctuations in demand can be fulfilled
immediately so that they can meet the value product quickly when demand soars.
Then the product will be distributed to distributors who have been
involved in managing fertilizer sales. Then the distributed fertilizer will reduce the
number of products stored in the warehouse at the factory.
Figure below will show ho much product in and out from the product store
in the plant. The assumption used is that during the third and ninth months there is
an increase in demand for this product because fertilizer will be used when the
harvest period has been carried out. In general, the types of plants that exist are
apple. These apples can generally be produced routinely for a year but for several
months have less optimal results so that this product is given more than usual
because it is needed in larger quantities.

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Product Inventory
2500 50000

Biocharcoal Product (sacks)

Biocharcoal Foliar Product (bottles)

45000
2000 40000
35000
1500 30000
25000
1000 20000
15000
500 10000
5000
0 0
0 50 100 150 200 250 300 350 400
Day

Biocharcoal Biocharcoal Foliar

Figure 1.5 Product Inventory

1.4.3 Product Distribution Location

Biocharming’s target consumer is everyone use fertilizer surround Malang.
This area is considered to have significant amount of farmer or people who use
fertilizer in their job or in their hobby. Based on the production capacity in one
day, production of Biocharming is 33 sack of solid fertilizer and 4200 bottles.
Therefore, there would be 231 sacks and 29400 bottles in a week and 924 sacks
and 117600 bottles in a month. This product would be distributed to distributors in
Malang, Surabaya, and Gresik each month. The table below shows the distribution
percentage in a month.
Table 1.8 Percentage of Distribution

Product Distribution
No. Distributor Address (pack/month and Percentage
Bottle/month)

Jl. Raya Krebet No. 23 167 sacks and 21168

1 Distributor 1 18%
Bululawang, Malang bottles

Jl. Aris Munandar

254 sacks and 32340
2 Distributor 2 No.53, Kiduldalem, 27.5%
bottles
Klojen, Malang

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Table 1.8 Percentage of Distribution (continued)

Product Distribution
No. Distributor Address (pack/month and Percentage
Bottle/month)
Jl. Panglima Sudirman
83 sack and 10584
3 Distributor 3 Utara No.37, Rampal 9%
bottles
Celaket, Klojen Malang

Jl. Villa Bukit Mas Paris 83 sack and 10584

4 Distributor 4 9%
Elok SB No. 37 Surabaya bottles

Gedung Graha Sarana Lt. 83 sacks and 10584

5 Distributor 5 9%
6 Jl. A. Yani, Gresik bottles
Gedung Yosindo Lt. 5 Jl. 254 sacks and 32340
6 Distributor 6 27.5%
Rajawali 84 Surabaya bottles

1.4.4 Distribution Pathway

This product is divided into 2 main routes: Gresik – Surabaya and Gresik –
Malang. The distribution is designed that way to make reach every location
efficiently. Figure below shows the distribution pathways for Biocharming.

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Figure 1.6 Distribution Route

(Source: earth.google.com)

1.4.5 Transportation Method

The distribution of biocharming is chosen by land transportation. This is
because the distance to Surabaya is quite close while the poor city is far but the
route to get to the city can be reached by toll road. Therefore, the land route is the

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most suitable route in the distribution of this product. This is because the distance
to Surabaya is quite close while the poor city is far but the route to get to the city
can be reached by toll road. Therefore, the land route is the most suitable route in
the distribution of this product.
Land transportation chosen is to use trucks because it has a large capacity
and is suitable for land transportation. The vendor is taken From PT Kargo Online
System which has already given the price range for distribution service including
driver fee, fuel price, and highway ticket. From PT Kargo Online System website,
Colt Diesel Engkel (CDE) Truck is chosen. Below is the information for the truck.

Figure 1.7 Fuso Truck

(Source: PT. Kargo Online System, 2019)

Table 1.9 Fuso Truck

Volume 9 m3
Size 5.7 m x 2.3m x 2.5 m
Maximum Capacity 7.5 tons
Price Starting from Rp2.000.000/35 km
Fuel Diesel
(Source: PT. Kargo Online System, 2019)

Referring to the plant location and distribution area, the estimated

distribution cost is shown below.
Table 1.10 Product Distribution by Truck
Round-Trip Round-Trip
Delivery Cost
No Route Pathway Distance Travel Time
(Rp/month)
(km) (hour)
1 Gresik-Surabaya Land 32 2 2000000
2 Grasik-Malang Land 125 4 1800000

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1.5 Product Marketing

The process of transitioning existing fertilizer users is quite difficult, so a
special strategy is needed to increase public awareness of the importance of soil
health. The promotion strategy is described in table below.

Table 1.11 Promotion Strategy of Biocharming

People who use fertilizer for their fruit plant in Surround

Target Market/ Segment
Malang

Positioning Improve soil health and fruit production

fertilizer with the multi-benefits needed by plants and

Product
with high quality

The marketing plan is to promote Biocharming as wide as possible to the

target market. These people are usually involved in many platforms such as social
media, website, direct counseling, etc.
1. Social Media
Nowadays people use social media a lot. Many social media such as
facebook, linkedin, twitter, even youtube, offer a marketing opportunity
due to the amount of its users. Biocharming will do marketing promotion
in those platforms especially the organization that is followed by many
farmers and fruit plant lovers.
2. Using Website
Some people search information in internet. Therefore, website is needed
to put some information about Biocharming. This website will be linked to
every social media and endorsement in order to attract people there to
view more about Biocharming.
3. Using Mass Media Advertising
Mass Media, especially TV and radio still play major role on information
broadcasting. This is a good place for marketing plan so Biocharming will
put advertisement in TV and radio.

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4. Using Print Media

Print media such as newspapers and magazines related to agriculture will
be used so that publications on the superiority of products can be more
quickly accepted in the community
5. Direct Counseling
Direct counseling in some farm cooperative in some region especially in
Malang, Surabaya, and cities that use a lot of fertilizer about awareness to
protect soil health

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PRODUCT COSTING

Calculating the economic analysis is the last part of product designing and
the part that will determine whether the product will be successful in the market or
not. All aspects are going to be analyzed to get the most accurate product price
that connected to the manufacturing process such as raw material, equipment, land
costing, all supporting things that helped the company going forward. Calculation
of tax and profit will also be included in this analysis as the result of product
costing. Product costing is divided in two type; fixed cost, which will never be
changed due to changing of total production, and variable cost, which is the
opposite of fixed cost as the cost that will be changed due to changing total
amount of production. To conclude whether the product is successful or not, it
depends from the return sales that will be counted in payback period section.

2.1 Total Capital Investment (TCI)

During the product manufacturing process, the capital investment is
required to determine the cost needed to manufacture the product. The capital
investment required will be received whether by the loan from the bank or self-
fund raiser if needed. And some assumptions have been made to evaluate the
product costing easier, such as:

 Currency conversion 1 US$ = Rp 14,202 (by May 2019)

 Equipment and plant salvage value.
 Plant will be built in 2018 and start to operate in 2019.
 To calculate depreciation, f factor that is used are 0.1 for
equipment cost and 0.03 for building plant cost.
 Plant is built in empty land in Kebomas, Gresik.

The initial investment cost is known as Total Capital Investment (TCI),

which including things that is settled for the plant. TCI includes purchase of the
land, plant building, manufacturing facilities, supporting facilities, utilities
installation, market research, product licensing and branding fee.

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To calculate the investment cost, there are two cost, Fixed Capital Cost
(FC) and Working Capital Cost (FW). Fixed Capital Cost is the capital needed to
fulfill the supply of budget for manufacturing and plant facilities. Fixed capital
consists of direct cost and indirect cost. Direct cost is cost that directly involved in
the production process of the product.
Direct cost consists of many components, such as equipment costs, land
cost, building cost, etc. Working Capital is the capital needed to operate the plant
until company get income. The TCI calculation is to determine the feasibility of
development of a plant and to identify whether it will give a sufficient positive
marginal value. The calculation is basically combining fees of each aspects and
multiply them with the quantities. The equation to calculate Total Capital
Investment:

( )

Dimana,
Cost of Fixed Capital

Cost of Working Capital

Direct Cost

Indirect Cost

2.1.1 Direct Cost Estimation

Direct cost is the cost that directly involved with the production process.
Things that were categorized as direct costs are purchased equipment, purchased
equipment installation, instrumentation and control, piping, valves and insulation,
electrical equipment, buildings, yard improvements, service facility, and land.

2.1.1.1 Equipment Cost

The first element and the foundation of fixed capital cost is Equipment
Cost. Product distribution and inventory is an important part in the management
of supply chain. In this part, the movement fee of the equipment to plant is

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arranged. Its goal is to improve the relation among all of the parties involved, such
as mention in previous section, thus improving inventory’s visibility and the
velocity of its movement.
The equipment cost is the cost until it is installed and can be used in
plant. These cost data are reported as purchased, delivered, or installed cost.
Purchased cost is the price of the equipment FOB at the manufacturer’s plant,
whereas delivered cost is the purchased price plus the delivery charge to the
purchaser’s plant FOB. To correct the price in year of purchase, cost index is
needed to obtain purchase in 2018. The estimation of price in 2018 is conducted
by using Marshall and Swift Chemical Equipment Index. The cost index is used to
project a cost from a base year to another selected year. Table below shows the
Marshall and Swift Chemical equipment cost index until the year 2013 and the
rest years are calculated.

Table 2.1 Marshall and Swift Chemical Equipment Index

FORECAST
Year Cost Index
2003 1123,6
2004 1178,5
2005 1244,5
2006 1302,3
2007 1373,3
2008 1449,3
2009 1468,6
2010 1457,4
2011 1565,64
2012 1618,88
2013 1672,12
2014 1724,474
2015 1777,865
2016 1831,256
2017 1884,647
2018 1938,038
2019 1991,429
2020 2044,82
2021 2098,211
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(Source: Preliminary Chemical Engineering Plant Design, 2014)

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As seen in the table, the annual index that has been made italic are
extrapolated. The calculation is based on Perry Chemical Engineering Handbook
(8th Edition), the formula is shown below,

( )

After getting the present cost from the index of equipment, then the total
cost can be calculated with adding shipping cost from the distributor to Indonesia.
The table below shows equipment cost

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Table 2.2 Equipment Cost

Price USD Price USD Price IDR in Shipping Total equipment price
Equipments Supplier Quantity
in 2019 in 2018 2018 Cost (Rp) (Rp)
Makwell Machinery Co.,
Mixing Tank 1 80,000 77,855 1,125,416,826 17,501,280 1,125,416,826
LTD
Rotary Drum Jhon R. Boone Co., LTD 3 30,000 29,196 414,637,163 28,353,225 1,328,971,163
Vibrating
Tianci Co., LTD 1 1,600 1,557 22,113,982 7,576,212 29,690,194
Screening
Belt Dryer
Beltomatic Co., LTD 1 25,000 24,330 345,530,969 19,717,725 365,248,694
Conveyor
Foliar
Packaging Rifu Machinery Co., LTD 1 8,000 7,786 110,569,910 3,550,500 114,120,410
Machine
Biocharcoal Zhengzhou Tianci Heavy
Packaging Industry Machinery Co., 1 10,000 9,732 138,212,388 26,074,892 164,287,280
Machine LTD
Pump CTMP Co., LTD 7 2,000 1,946 27,642,478 21,239,012 342,170,428
Conveyor YingDa Co., LTD 5 3,000 2,920 41,463,716 7,576,212 245,199,641
Yaolong Metal Products
Pipe 33 2,800 2,725 38,699,469 7,576,212 1,527,097,457
Co., LTD
Guangzhou Hundom 2 10,750 10,462 148,578,317 29,852,924 356,862,480
Storage Tank Machinery Science and
Technology Co., LTD 2 500 487 6,910,619 20,634,527 55,090,293
Total 5,654,154,867

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2.1.1.2 Land and Building Cost Estimation

Land is often acquired by a company some time prior to the building of a manufacturing
facility. The land that is chosen is empty with no building that will make this plant a grass root
type, which means the whole plant will be built in an empty land. The plant location is in
Kebomas, Gresik. The table below shows detail of land cost.
Table 2.3 Land Cost
Land Cost
Price/m2 (Rp) Area (m2) Land Cost (Rp)
1,600,000 2750 4,400,000,000

Not just land that is being counted, the building too. The building cost is including
material and installation. The table below shows building cost.

Table 2.4 Building Cost

Building Cost
Area
Components Price Per m2 (Rp) Quantity Building Cost (Rp)
(m2/unit)
Plant Building Area 3,500,000 1 700 2,450,000,000
Office Building Area 3,000,000 4 60 720,000,000
Parking Area 450,000 1 825 371,250,000
Other Rooms Building
2,700,000 1 867 2,340,900,000
Area
Road & Land
200,000 1 2750 550,000,000
Treatment
Total Building Cost 6,432,150,000

2.1.1.3 Supporting Facilities Cost Estimation

Supporting facilities investment cost is cost for providing equipment in office and also
supporting facilities in the plant that are needed to accelerate production process. There will be
many people who contribute in plant as general (including office, security post, etc), so there are
some equipment and facilities which are needed to provide their job. The list of supporting
facilities cost is shown in table below.

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Table 2.5 Supporting Equipment Cost

Supporting Equipment Cost
Equipments Quantity Price (Rp) Total Price (Rp)
Computers 30 5,400,000 162,000,000
Facsimiles 1 1,650,000 1,650,000
Photocopy + Scanner Machine 5 17,000,000 85,000,000
Clock 10 30,000 300,000
Printer 3 1,500,000 4,500,000
Director Desk & Chair 2 5,100,000 10,200,000
Meeting Chair 32 1,100,000 35,200,000
Meeting Desk 2 4,800,000 9,600,000
Office Desk & Chair 15 3,365,000 50,475,000
Sofa 8 1,000,000 8,000,000
Filling Cabinet 20 3,616,000 72,320,000
Whiteboard 5 250,000 1,250,000
CCTV (4 pcs/set) 5 6,500,000 32,500,000
Projector Set 3 12,000,000 36,000,000
Absence Machine 1 2,000,000 2,000,000
Pantry Utensils 1 3,000,000 3,000,000
Dispenser 6 560,000 \3,360,000
Toilet Set 7 4,500,000 31,500,000
Neon Lamp 30 37,000 1,110,000
Generator Diesel 2 58,105,500 116,211,000
Trash can 15 195,000 2,925,000
Air Conditioner 2PK 5 5,661,000 28,305,000
Telephone 10 326,000 3,260,000
LED TV 32" 2 2,435,000 4,870,000
Total Supporting Facilities Cost (Rp) 705,536,000

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2.1.1.4 Utilities Installation Cost

Utilities Installation Cost is needed to provide utilities for plant and office. Common
utilities needed for plant and office is including water, electricity, telephone, internet, and
hydrants. Table below shows detail of utilities installation cost.
Table 2.6 Utilities Cost

Utilities Cost
Installation Quantity Cost (Rp) Total Cost (Rp)
Water Installation 1 20,745,000 20,745,000
Electricity Installation (82.5kW) 1 66,412,500 66,412,500
Hydrants Installation 1 78,250,000 78,250,000
Telephone & Internet
10 850,000 8,500,000
Installation
Total Utilities Cost (Rp) 173,907,500

2.1.1.5 Market Research Cost

Market research is needed for this product because the huge amount of competitor who
produce same kind of fertilizer. Market research is the process of gathering, analyzing, and
interpreting information about market, product to be offered for sale in that market, and about the
past, present and potential customers for this product. With market research, it is hoped that the
distribution could be accurate. The table below shows detail of market research cost.
Table 2.7 Market Research Activities Cost

Market Research Activities Cost

Market Research Activities Price (Rp)
Survey 10,000,000
MR Consultant Service 50,000,000
Total Markest Research Cost (Rp) 60,000,000

2.1.1.6 Patent and Brand Trademark Cost Estimation

A patent is an exclusive right granted for an invention, which is a product or a process
that provides, in general, a new way of doing something, or offers a new technical solution to a
problem (World International Property Organization). Brand is what makes the product has name
in public as official name.

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Cost of patent and brand registration and maintenance are regulated in

Peraturan Pemerintah No. 45 Tahun 2014. According to the regulation, patent cost
is shown in table below.

Table 2.8 Patent Cost

Patent Cost
Price per
Non-Tax revenue Unit Quantity Price
Unit
Patent Request per request 750,000 1 750,000
Claim Cost per claim 50,000 1 50,000
Acceleration of Patent Announcement per request 200,000 1 200,000
Request for Priority Right Letter per request 250,000 1 250,000
Compulsory License Request per request 3,000,000 1 3,000,000
Copy of Certificate Request per request 150,000 3 450,000
Patent
Research Cost
(a) Local per subject 250,000 1 250,000
(b) Global per subject 1,387,500 1 1,387,500
Total Patent Cost 6,337,500

Brand cost is shown in detail in table below.

Table 2.9 Brand Cost

Brand Cost
Non-Tax revenue Unit Price per Unit Quantity Price
Brand Request per request 1,000,000 1 1,000,000
Recording of a License
per item 500,000 1 500,000
Agreement
Website License per domain 3,000,000 1 3,000,000
The cost of a Copy of
Evidence Priority per request 300,000 1 300,000
Trademark Application
Total Brand Cost (Rp) 4,800,000

2.1.2 Indirect Cost

Indirect cost is not directly related to production but still contribute to total
investment, for example cost of engineering and supervision of plant ,
construction expense, contractor’s fee, and contingency. The calculation for

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indirect cost uses Modular Guthrie Method. Indirect cost is 18% of total direct
cost (except market research cost and patent cost). Contingency and contractor’s
fee are respectively chosen 13% and 5% of it. The list of indirect cost is shown in
table below
Table 2.10 Brand Cost

INDIRECT COSTS
Description Price (Rp)
Contractors' Fees 585,579,675
Contingency 1,522,507,155
Total Indirect Cost 2,108,086,830

2.1.3 Working Capital

Working capital investment is cost needed to starts the production until the
plant starts to get income. The working capital for a consists of money invested in
raw materials and supplies carried in stock, cash kept on hand for monthly
payment of operating expenses, accounts receivable, such as salaries, and payable
taxes. Working capital is counted by adding 15% of Fixed Capital Investment
(Total of Direct and Indirect Cost), 15% is chosen because of the Biocharming
product is petrochemical product, and 10% of Contractors’ Fees. The calculation
is shown below.

To count the working capital is by adding 15% of Fixed Capital and 10%
of Contractor’s Fees, is shown below:

So, the working capital of PT. Biocharming is

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2.1.4 Total Capital Investment

Total capital investment can be calculated from the equation below:

The calcutlation of total capital investment is shown in Table bla.bla for

Fixed Capital Cost and Table bla.bla for Total Capital Investment.

Table 2.11 Fixed Capital Cost

In/Direct Amount Cost Accumulation
Type of Cost
Cost (Rp) (Rp)
Equipment Cost 5,654,154,867
Land Cost 4,400,000,000
Building Cost 6,432,150,000
Supporting Facilities
705,536,000
Direct Cost Cost 17,436,885,867
Utilities Cost 173,907,500
Market Research Cost 60,000,000
Patent Cost 6,337,500
Brand Cost 4,800,000
Contractors' Fees 585,579,675
Indirect Cost 2,108,086,830
Contingency 1,522,507,155

Table 2.12 Total Capital Investment

Capital Investment Cost (Rp)

Total Fixed Capital Investment 13,890,817,830
Total Working Capital Investment 2,142,180,642
Total Capital Investment (Rp) 16,032,998,472

The cost of total capital investment is Rp 16,032,998,472. The value of

total capital investment shows the amount of money that will be spent as an early
capital investment at the beginning of the project.

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2.2 Operational Cost Estimation

2.2.1 Manufacturing Cost
Manufacturing cost is cost which are required to support the production
process of Biocharming products. The costs consist of raw material cost, utilities
cost, direct labor salary, maintenance cost, patent and brand registration cost, and
fixed cost. The detail of each cost will be explained further in the next section.
2.2.1.1 Raw Material Cost
Raw material should to be calculated precisely as it is important
component for production. Usually, raw material cost comprises of 10%-50%
plant operation. It is calculated based on material used to make final product
including packaging. The amount is decided based on optimum operating plant
capacity with addition safe inventory. However, Biocharming main raw material
component is water, which is supplied from the same supplier in utility segment.
As a result,the raw material calculation below excluded water price and allocated
it in other section.

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Table 2.13 Raw Material Cost

Material Needed/ Safety Raw

Month Packaging Price/ Time Delivery Inventory Material
Raw Locati Packaging Raw Material
Supplier Size(kg/dru Metric Order Cost/Order( Cost /
Materials on Size(L/drum) Cost / Year (Rp)
m) ton(Rp)* (days) Rp) Month
(Rp)
Amount Unit (ton)

PT.
Potassium Semar 25,000,00 63,857,690
Saprotan 1.9954461 ton 1000 - 1 1,500,000 0.498861525 766,292,288
Nitrate ang 0 .63
Utama
Xiamen
7,808,500.
Copper (Cu) Vastland China 0.7076394 ton - 200 1,449 15 7,807,219 0.17690985 93,702,009
71
Co., Ltd.
Xiamen
7,808,689.
Zinc (Zn) Vastland China 0.7058037 ton - 1000 1,667 15 7,807,219 0.176450925 93,704,277
72
Co., Ltd.
Zhongch
uang
Xingyua
n 49,307,853
Biocharcoal China 8.55 ton 25 - 2,854,666 12 18,798,611 2.1375 591,694,247
Chemical .88
Technolo
gy
Co.,Ltd

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Table 2.13 Raw Material Cost(cot’d)

Lim
Sidoarj
Woven Bag Corporati 37 pack - - 6,500,000 1 750,000 69.927 7,250,000 7,250,000
o
on
Aryta
Polyethylene Jaya 651,000,00
Jakarta 712 bottle - - 27,000 1 3,000,000 105 651,000,000
Bottle Packagin 0
g
787,032,73
TOTAL RAW MATERIAL COST 2,203,642,819.16
4.93

* (for sack per 25000 sheet, for bottle per unit)

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2.2.1.2 Utilities: Electricity and Water

In PT Biocharming, water is essential raw material to produce immersion
solution. First operation requires 23,636 Litre of water and fresh water
reintroduced for latter batch is 2,400.2488 Litre. In the first month of optimum
operation, the amount of water needed for production reach 237,528.1421 Litre.
The following months, the water necessity drops to 216,022.3909 Litre. This
water is obtained from PDAM Giri Tirta at Gresik. With Biocharming targeted
capacity, it is classified as IK-III (Anon., 2019).
Secondary usage of water comes from common activity of employees. The water
is used for bath, toilet, kitchen and drinking water. According to survey from
Direktorat Pengembangan Air Minum, Ditjen Cipta Karya in 2016, average water
usage in Indonesia is 30 L per person in a day. In this case, water usage has
included drinking water and other activity.
Table 2.14 Water Usage Estimation
Tarif(per meter kubik) Rp7,400

Karyawan 71

Kebutuhan tiap Orang 30

Below are the table of water needed per day for various activity.

Table 2.15 Water Price for Various Usage

Total Utilities Cost for Water/year
3
Water Needs L/ day m /year (Rp)

Employee (Utilities) 2100 630 4,662,000

While, below is presented table of water needed per day for production.
Table 2.16 Water Price for Production

Water Needs L/ day m3/year Total Utilities Cost for Water / year(Rp)
Immersion liquid at
optimum plant operation 2400.3 720.09 5,328,666

TOTAL WATER COST PER YEAR (Rp) 9,990,666

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Meanwhile, electricity is supplied from Perusahaan Listrik Negara. This

decision is based on low power demand for plant. The price of electricity is
calculated by projecting PLN fare for 200 kilo volt ampere(kVA) installment in
2021 based on current price and linear trend in price increase. For 200 kilo volt
ampere (kVA) installment, it cost IDR 1,035.78/kWh of usage.

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Table 2.17 Equipment power Usage Cost Estimation

Equipments Qty Power (kW) Working Time/day (h) Total Power/day Total Power/year Total Cost/year
(kWh) (kWh) (Rp)

Mixer 1 26 1 26 8,710 9,021,644

Rotary Drum 3 4 6 72 24,120 24,983,014

Vibrating Screen 1 1.5 2.3 3.45 1,156 1,197,103

Drying 1 3.5 2.87 10.045 3,365 3,485,477

Packaging Foliar 1 1.6 1 1.6 536 555,178

Packaging Biocharcoal 1 3.2 1 3.2 1,072 1,110,356

Pump 9 110 2 1980 663,300 687,032,874

Conveyor 2 1 13.5 27 9,045 9,368,630

TOTAL (Rp) 2123.295 711303.825 736,754,276

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Table 2.18 Support Facilities Power Usage Cost Estimation

Equipments Power Working Time/day Total Power/day Total Power/year Total Cost/year
Qty
(kW) (h) (kWh) (kWh) (Rp)
Printer & Photocopy Machine 8 0.02 8 1.28 467 483,916
Computer 30 0.5 15 225 82,125 85,063,433
Projector Set 3 0.025 24 1.8 657 680,507
Air Conditioner 5 0.2 5 5 1,825 1,890,299
CCTV 20 0.75 24 360 131,400 136,101,492
Long Neon Lamp 30 0.35 24 252 91,980 95,271,044
Absence Machine 1 0.018 10 0.18 66 68,051
Fax Machine 1 0.35 15 5.25 1,916 1,984,813
LED TV 32” 2 0.036 5 0.36 131 136,101
Water Dispenser 3 0.15 15 6.75 2,464 2,551,903
TOTAL ELECTRICITY COST FOR MAIN EQUIPMENTS 857.62 313031.3 324,231,560
TOTAL ELECTRICITY COST (Rp) 1,060,985,836

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2.2.1.3 Maintenance Cost

Maintenance is the activity to preserve or maintain the plant along with
its facilities including the equipment which are involved in the production process
by repairing, adjusting, or replacing some of their components. Maintenance is an
activity that must be done to keep obtaining the desired production capacity to
fulfill the demand of consumer.
To keep the efficiency of the equipment and building in the plant,
maintenance process must be done. The maintenance process will take some times
and needs cost. Maintenance activities may include the act of inspecting,
lubricating the equipment, replacement of equipment’s components which are
needed to be done in a certain period of time.
Table 2.19 Total Maintenance Estimation
MAINTENANCE COST
Jenis Biaya Jumlah (1% dari total) (Rp)
Supporting Facilities Maintenance
35,276,800
(5% of Supporting Facilities Cost)
Factory, Warehouses and Buildings
64,321,500
(1% of cost of Csite, DCs, and Cbuilding)
Equipments Maintenance
1,052,971,075
(10% of Total Bare Modul Cost)
MAINTENANCE COST PER YEAR (Rp) 1,152,569,375

2.2.1.4 Patent and Trademaark

To create a legally distributed product in public, patent and brand for
copyright needed to be made and registered according to the law. Patent and brand
registration will include patent, copyright, industrial design, and brand.

 Copyright
Copyright is an exclusive right for inventor to announce or to copy the
invention. Copyright registration and maintenance of Biocharming should also be
done to make the product legal in the law. The calculation of copyright’s cost is
shown below.

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Table 2.20 copyright Registration cost

Copyright Registration Cost
Component Total Cost per Year (Rp)
Industrial Design Registration 600,000
Industrial Design General List of Quotes Request 150,000
Industrial Design Certificate Publishing Cost 150,000
Industrial Design Priority Document Request 150,000
Industrial Design Copy of Document Request 150,000
Industrial Design License Administration 250,000
Total Copyright Registration Cost (Rp) 1,450,000

 Brand
Brand is an identity of a product that can differentiate it from another
existing product. Biocharming brand should be registered to the sovereign state so
that the brand will be legal in the law. The detail of brand cost calculation is
shown in Table below
Table 2.21 Brand Registration cost
Brand Registration Cost
Component Total Cost per Year (Rp)
Brand Publishing Cost 600,000
Lengthening Time of Brand Protection 2,000,000
Brand Certificate Publishing Cost 200,000
License Administration 500,000
Official Brand Quotes Request 200,000

Written Notes of General List of Brand Request 200,000

Total Brand Registration Cost (Rp) 3,700,000

 Patent
There is annual payment for brand and patent that have been registered.
This payment can be calculate based on the data from Direktorat Jenderal Hak

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Kekayaan Intelektual Kementerian Hukum dan HAM Indonesia, details of costs

to be incurred general industry annually with an estimated factory operation for 10
years is as follows.
Table 2.22 Patent Registration cost
Patent Registration
Base Cost Cost per Claim Cost of Claim Total Cost
Year
(Rp) (Rp) (Rp) (Rp)
1 3,080,000 50,000 50,000 3,130,000
2 3,080,000 50,000 50,000 3,130,000
3 3,080,000 50,000 50,000 3,130,000
4 3,080,000 100,000 100,000 3,180,000
5 3,080,000 100,000 100,000 3,180,000

6 3,080,000 150,000 150,000 3,230,000

7 3,080,000 200,000 200,000 3,280,000
8 3,080,000 200,000 200,000 3,280,000
9 3,080,000 200,000 200,000 3,280,000
10 3,080,000 250,000 250,000 3,330,000
Total Patent Registration Cost per Year (Rp) 3,215,000

2.2.1.5 Safety Cost

For plant and personal safety, equipments for HSE needs to be provided
maintained, checked, or replaced within certain time.
Table 2.23 Safety Cost Estimation

Safety and Protection

Components Price per Unit Total Price per Unit

Quantity
(Rp) (Rp)
Fire Extingusher 10 1,900,000 19,000,000

First Aid Kit 3 200,000 600,000

Control Laboratory - 41,980,000 41,980,000

Total Plant Overhead Cost (Rp) 61,580,000

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2.2.1.6 Direct and Indirect Salary

PT Biocharming operates everyday for 15 hours. The workers will be
divided into two shifts per day. Direct labors are labors who involve directly to
the production process while indirect labors are those who aren’t involve directly
to the production process. Determination for the employees’ salary is based on the
website published in www.gajiumr.com regarding the Regional Minimum Wage
Policy. The Regional Minimum Wage on the province of Gresik, East Java on
2019 is Rp 3,867,000. Assuming that PT Biocharming will have operate fully in
2021, the minimum wage is forecasted to that year by average increase of 8%.
The calculation of direct and indirect labor cost is shown in table below.

Table 2.24 Direct Labor Salary

Direct Labor Salary

Total Monthly Total Annual
Salary per Month Workers
Direct Labor Salary Salary
(Rp) (person)
(Rp) (Rp)

Warehouseman 4,600,000 7 32,200,000 386,400,000

Operator 4,600,000 12 55,200,000 662,400,000

Driver 4,600,000 3 13,800,000 165,600,000

Controller 7,000,000 3 21,000,000 252,000,000

Total Direct Labor Salary (Rp) 122,200,000 1,466,400,000

Table 2.25 Indirect Labor Salary

Indirect Labor Salary

Amount of Human Total Monthly Total Annual

Salary/month
Division Position Resource Salary Salary
(Rp)
(Person) (Rp) (Rp)
Board of President
30,000,000 1 30,000,000 360,000,000
Directors Director

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Table 2.13 Indirect Labor Salary (continued)

Indirect Labor Salary
Amount of Human Total Monthly Total Annual
Salary/month
Division Position Resource Salary Salary
(Rp)
(Person) (Rp) (Rp)
Secretary of
Board of
President 17,000,000 1 17,000,000 204,000,000
Directors
Director
Engineering and
Maintenance 15,000,000 1 15,000,000 180,000,000
Engineering Manager
and Head of
Maintenance Electrical and 9,000,000 1 9,000,000 108,000,000
Department Instrumentation
Head of
9,000,000 1 9,000,000 108,000,000
Maintenance
Production
17,500,000 1 17,500,000 210,000,000
Manager
Production
Head of Process
Department 12,500,000 1 12,500,000 150,000,000
Engineer
Head of Utilities 9,000,000 1 9,000,000 108,000,000
Quality Control
15,000,000 1 15,000,000 180,000,000
Manager
Head of
Quality Control Research and 9,000,000 1 9,000,000 108,000,000
Department Development
Head of Quality
Control and 9,000,000 1 9,000,000 108,000,000
Laboratory
Finance and
Marketing 15,000,000 1 15,000,000 180,000,000
Finance and
Manager
Marketing
Head of
Department 7,000,000 1 7,000,000 84,000,000
Marketing
Head of Finance 9,000,000 1 9,000,000 108,000,000
Administration Administration
15,000,000 1 15,000,000 180,000,000
Department Manager

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Table 2.13 Indirect Labor Salary (continued)

Indirect Labor Salary

Amount of Human Total Monthly Total Annual
Salary/month
Division Position Resource Salary Salary
(Rp)
(Person) (Rp) (Rp)
Head of Human
Resource 8,000,000 1 8,000,000 96,000,000
Administration Development
Department Head of Health
and Safety 10,000,000 1 10,000,000 120,000,000
Environment
Supply Chain Supply Chain
15,000,000 1 15,000,000 180,000,000
Department Manager
Clinic 7,000,000 3 21,000,000 252,000,000
Head of Security 5,000,000 2 10,000,000 120,000,000
General
Support and Security 4,500,000 6 27,000,000 324,000,000
Service Receptionist 4,700,000 2 9,400,000 112,800,000
Department
Cleaning Service 4,500,000 10 45,000,000 540,000,000
Office Boy/Girl 4,500,000 4 18,000,000 216,000,000
Total Cost 361,400,000 4,336,800,000

2.2.2 Fixed Charge

2.2.2.1 Depreciation
The safety baby and railing plant will be producing until the next 10
years. Therefore, the depreciation value of each equipments and tools used must
be calculated. Depreciation is the deduction for exhaustion, wear and tear and
normal absolescence of equipment used in the trade or bussiness (Perry, 2013).
The method that is used for calculating the depreciation is declining balance
method. First, the percentage factor is assumed. The factors are 10% for main
equipment and supporting equipment, and 3% for building. Then the depreciation
calculation is done for each thing by using the equation below.
( ) ( )
The salvage value is calculated by the equation below.

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( ) ( )

Table 2.14 shows the calculation of the main equipment’s depreciation. Table
3.3.2 shows the calculation of the supporting equipment’s depreciation. Table
3.3.3 shows the calculation of the building’s depreciation.

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Table 2.26 Depreciation of Main Equipment

Year 1 Year 2 Year 3
Initial Value
Equipments Depreciation Salvage Value Depreciation Salvage Value Depreciation Salvage Value
(Rp)
(Rp) (Rp) (Rp) (Rp) (Rp) (Rp)
Mixing Tank 4,599,708,258 459,970,825.82 4,139,737,432 413,973,743.24 3,725,763,689 372,576,368.92 3,353,187,320
Rotary Drum 1,243,911,488 124,391,148.81 1,119,520,339 111,952,033.93 1,007,568,305 100,756,830.54 906,811,475
Vibrating Screening 22,113,982 2,211,398.20 19,902,584 1,990,258.38 17,912,325 1,791,232.54 16,121,093
Belt Dryer Conveyor 711,793,796 71,179,379.60 640,614,416 64,061,441.64 576,552,975 57,655,297.47 518,897,677
Foliar Packaging
Machine 110,569,910 11,056,991.01 99,512,919 9,951,291.90 89,561,627 8,956,162.71 80,605,464

Biocharcoal
Packaging Machine 284,717,518 28,471,751.84 256,245,767 25,624,576.65 230,621,190 23,062,118.99 207,559,071

Pump 638,541,231 63,854,123.06 574,687,108 57,468,710.75 517,218,397 51,721,839.68 465,496,557

Conveyor 333,782,916 33,378,291.60 300,404,624 30,040,462.44 270,364,162 27,036,416.19 243,327,746
Pipe 1,277,082,461 127,708,246.11 1,149,374,215 114,937,421.50 1,034,436,794 103,443,679.35 930,993,114

Storage Tank 1,236,171,594 123,617,159.44 1,112,554,435 111,255,443.50 1,001,298,991 100,129,899.15 901,169,092

71,317,592 7,131,759.20 64,185,833 6,418,583.28 57,767,250 5,776,724.95 51,990,525
Total 10,458,393,155 1,045,839,315 9,412,553,839 941,255,384 8,471,298,455 847,129,846 7,624,168,610

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Table 2.14 Depreciation of Main Equipment (continued)

Year 4 Year 5 Year 6

Initial Value
Equipments Depreciation Salvage Value Depreciation Salvage Value Depreciation Salvage Value
(Rp)
(Rp) (Rp) (Rp) (Rp) (Rp) (Rp)
Mixing Tank 4,599,708,258 335,318,732.02 3,017,868,588 301,786,858.82 2,716,081,729 271,608,172.94 2,444,473,556
Rotary Drum 1,243,911,488 90,681,147.48 816,130,327 81,613,032.73 734,517,295 73,451,729.46 661,065,565
Vibrating Screening 22,113,982 1,612,109.29 14,508,984 1,450,898.36 13,058,085 1,305,808.52 11,752,277
Belt Dryer Conveyor 711,793,796 51,889,767.73 467,007,910 46,700,790.95 420,307,119 42,030,711.86 378,276,407
Foliar Packaging
Machine 110,569,910 8,060,546.44 72,544,918 7,254,491.80 65,290,426 6,529,042.62 58,761,384

Biocharcoal
Packaging Machine 284,717,518 20,755,907.09 186,803,164 18,680,316.38 168,122,847 16,812,284.74 151,310,563

Pump 638,541,231 46,549,655.71 418,946,901 41,894,690.14 377,052,211 37,705,221.12 339,346,990

Conveyor 333,782,916 24,332,774.57 218,994,971 21,899,497.12 197,095,474 19,709,547.41 177,385,927
Pipe 1,277,082,461 93,099,311.42 837,893,803 83,789,380.27 754,104,422 75,410,442.25 678,693,980

Storage Tank 1,236,171,594 90,116,909.23 811,052,183 81,105,218.31 729,946,965 72,994,696.48 656,952,268

71,317,592 5,199,052.46 46,791,472 4,679,147.21 42,112,325 4,211,232.49 37,901,092
Total (Rp) 10,458,393,155 762,416,861 6,861,751,749 686,175,175 6,175,576,574 617,557,657 5,558,018,917

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Table 2.14 Depreciation of Main Equipment (continued)

Year 7 Year 8 Year 9 Year 10

Equipments Salvage Salvage Salvage Salvage

Depreciation Depreciation Depreciation Depreciation
Value Value Value Value
(Rp) (Rp) (Rp) (Rp)
(Rp) (Rp) (Rp) (Rp)
Mixing Tank 244,447,355.65 2,200,026,201 220,002,620.08 1,980,023,581 198,002,358.07 1,782,021,223 178,202,122.27 1,603,819,100
Rotary Drum 66,106,556.51 594,959,009 59,495,900.86 535,463,108 53,546,310.78 481,916,797 48,191,679.70 433,725,117
Vibrating Screening 1,175,227.67 10,577,049 1,057,704.90 9,519,344 951,934.41 8,567,410 856,740.97 7,710,669
Belt Dryer Conveyor 37,827,640.67 340,448,766 34,044,876.61 306,403,889 30,640,388.94 275,763,501 27,576,350.05 248,187,150
Foliar Packaging
Machine 5,876,138.36 52,885,245 5,288,524.52 47,596,721 4,759,672.07 42,837,049 4,283,704.86 38,553,344

Biocharcoal Packaging
Machine 15,131,056.27 136,179,506 13,617,950.64 122,561,556 12,256,155.58 110,305,400 11,030,540.02 99,274,860

Pump 33,934,699.01 305,412,291 30,541,229.11 274,871,062 27,487,106.20 247,383,956 24,738,395.58 222,645,560

Conveyor 17,738,592.66 159,647,334 15,964,733.40 143,682,601 14,368,260.06 129,314,341 12,931,434.05 116,382,906
Pipe 67,869,398.02 610,824,582 61,082,458.22 549,742,124 54,974,212.40 494,767,912 49,476,791.16 445,291,120

65,695,226.83 591,257,041 59,125,704.15 532,131,337 53,213,133.73 478,918,204 47,891,820.36 431,026,383

Storage Tank
3,790,109.24 34,110,983 3,411,098.32 30,699,885 3,069,988.48 27,629,896 2,762,989.64 24,866,907
Total (Rp) 555,801,892 5,002,217,025 500,221,702 4,501,995,322 450,199,532 4,051,795,790 405,179,579 3,646,616,211

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Table 2.27 Depreciation of Supporting Equipment

Year 1 Year 2
Initial Value Salvage Salvage
Equipments Depreciation Depreciation
(Rp) Value Value
(Rp) (Rp)
(Rp) (Rp)
Computers 162,000,000 16,200,000 145,800,000 14,580,000 131,220,000
Faximiles 1,650,000 165,000 1,485,000 148,500 1,336,500
Photocopy +
85,000,000 8,500,000 76,500,000 7,650,000 68,850,000
Scanner Machine
Clock 300,000 30,000 270,000 27,000 243,000
Printer 4,500,000 450,000 4,050,000 405,000 3,645,000
Director Desk &
10,200,000 1,020,000 9,180,000 918,000 8,262,000
Chair

Meeting Chair 35,200,000 3,520,000 31,680,000 3,168,000 28,512,000

Meeting Desk 9,600,000 960,000 8,640,000 864,000 7,776,000

Office Desk &
50,475,000 5,047,500 45,427,500 4,542,750 40,884,750
Chair
Sofa 8,000,000 800,000 7,200,000 720,000 6,480,000
Filling Cabinet 72,320,000 7,232,000 65,088,000 6,508,800 58,579,200
Whiteboard 1,250,000 125,000 1,125,000 112,500 1,012,500
CCTV (4 pcs/set) 32,500,000 3,250,000 29,250,000 2,925,000 26,325,000
Projector Set 36,000,000 3,600,000 32,400,000 3,240,000 29,160,000
Absence Machine 2,000,000 200,000 1,800,000 180,000 1,620,000
Pantry Utensils 3,000,000 300,000 2,700,000 270,000 2,430,000
Dispenser 3,360,000 336,000 3,024,000 302,400 2,721,600
Toilet Set 31,500,000 3,150,000 28,350,000 2,835,000 25,515,000
Neon Lamp 1,110,000 111,000 999,000 99,900 899,100
Generator Diesel 116,211,000 11,621,100 104,589,900 10,458,990 94,130,910
Trash can 2,925,000 292,500 2,632,500 263,250 2,369,250
Air Conditioner
28,305,000 2,830,500 25,474,500 2,547,450 22,927,050
2PK
Telephone 3,260,000 326,000 2,934,000 293,400 2,640,600
LED TV 32" 4,870,000 487,000 4,383,000 438,300 3,944,700
Total Supporting
705,536,000 70,553,600 634,982,400 63,498,240 571,484,160
Facilities Cost

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Table 2.15 Dreciation of Supporting Equipment (continued)

Year 3 Year 4 Year 5

Equipments Salvage Salvage Salvage
Depreciation Depreciation Depreciation
Value Value Value
(Rp) (Rp) (Rp)
(Rp) (Rp) (Rp)
Computers 13,122,000 118,098,000 11,809,800 106,288,200 10,628,820 95,659,380
Faximiles 133,650 1,202,850 120,285 1,082,565 108,257 974,309
Photocopy +
6,885,000 61,965,000 6,196,500 55,768,500 5,576,850 50,191,650
Scanner Machine
Clock 24,300 218,700 21,870 196,830 19,683 177,147
Printer 364,500 3,280,500 328,050 2,952,450 295,245 2,657,205
Director Desk &
826,200 7,435,800 743,580 6,692,220 669,222 6,022,998
Chair
Meeting Chair 2,851,200 25,660,800 2,566,080 23,094,720 2,309,472 20,785,248
Meeting Desk 777,600 6,998,400 699,840 6,298,560 629,856 5,668,704
Office Desk &
4,088,475 36,796,275 3,679,628 33,116,648 3,311,665 29,804,983
Chair
Sofa 648,000 5,832,000 583,200 5,248,800 524,880 4,723,920
Filling Cabinet 5,857,920 52,721,280 5,272,128 47,449,152 4,744,915 42,704,237
Whiteboard 101,250 911,250 91,125 820,125 82,013 738,113
CCTV (4 pcs/set) 2,632,500 23,692,500 2,369,250 21,323,250 2,132,325 19,190,925
Projector Set 2,916,000 26,244,000 2,624,400 23,619,600 2,361,960 21,257,640
Absence Machine 162,000 1,458,000 145,800 1,312,200 131,220 1,180,980
Pantry Utensils 243,000 2,187,000 218,700 1,968,300 196,830 1,771,470
Dispenser 272,160 2,449,440 244,944 2,204,496 220,450 1,984,046
Toilet Set 2,551,500 22,963,500 2,296,350 20,667,150 2,066,715 18,600,435
Neon Lamp 89,910 809,190 80,919 728,271 72,827 655,444
Generator Diesel 9,413,091 84,717,819 8,471,782 76,246,037 7,624,604 68,621,433
Trash can 236,925 2,132,325 213,233 1,919,093 191,909 1,727,183
Air Conditioner
2,292,705 20,634,345 2,063,435 18,570,911 1,857,091 16,713,819
2PK
Telephone 264,060 2,376,540 237,654 2,138,886 213,889 1,924,997
LED TV 32" 394,470 3,550,230 355,023 3,195,207 319,521 2,875,686
Total Supporting
57,148,416 514,335,744 51,433,574 462,902,170 46,290,217 416,611,953
Facilities Cost

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Table 2.15 Dreciation of Supporting Equipment (continued)

Year 6 Year 7 Year 8

Equipments Salvage Salvage Salvage
Depreciation Depreciation Depreciation
Value Value Value
(Rp) (Rp) (Rp)
(Rp) (Rp) (Rp)
Computers 9,565,938 86,093,442 8,609,344 77,484,098 7,748,410 69,735,688
Faximiles 97,431 876,878 87,688 789,190 78,919 710,271
Photocopy +
5,019,165 45,172,485 4,517,249 40,655,237 4,065,524 36,589,713
Scanner Machine
Clock 17,715 159,432 15,943 143,489 14,349 129,140
Printer 265,721 2,391,485 239,148 2,152,336 215,234 1,937,102
Director Desk &
602,300 5,420,698 542,070 4,878,628 487,863 4,390,766
Chair
Meeting Chair 2,078,525 18,706,723 1,870,672 16,836,051 1,683,605 15,152,446
Meeting Desk 566,870 5,101,834 510,183 4,591,650 459,165 4,132,485
Office Desk &
2,980,498 26,824,484 2,682,448 24,142,036 2,414,204 21,727,832
Chair
Sofa 472,392 4,251,528 425,153 3,826,375 382,638 3,443,738
Filling Cabinet 4,270,424 38,433,813 3,843,381 34,590,432 3,459,043 31,131,389
Whiteboard 73,811 664,301 66,430 597,871 59,787 538,084
CCTV (4 pcs/set) 1,919,093 17,271,833 1,727,183 15,544,649 1,554,465 13,990,184
Projector Set 2,125,764 19,131,876 1,913,188 17,218,688 1,721,869 15,496,820
Absence Machine 118,098 1,062,882 106,288 956,594 95,659 860,934
Pantry Utensils 177,147 1,594,323 159,432 1,434,891 143,489 1,291,402
Dispenser 198,405 1,785,642 178,564 1,607,078 160,708 1,446,370
Toilet Set 1,860,044 16,740,392 1,674,039 15,066,352 1,506,635 13,559,717
Neon Lamp 65,544 589,900 58,990 530,910 53,091 477,819
Generator Diesel 6,862,143 61,759,290 6,175,929 55,583,361 5,558,336 50,025,025
Trash can 172,718 1,554,465 155,446 1,399,018 139,902 1,259,117
Air Conditioner
1,671,382 15,042,438 1,504,244 13,538,194 1,353,819 12,184,374
2PK
Telephone 192,500 1,732,498 173,250 1,559,248 155,925 1,403,323
LED TV 32" 287,569 2,588,118 258,812 2,329,306 232,931 2,096,375
Total Supporting
41,661,195 374,950,757 37,495,076 337,455,682 33,745,568 303,710,113
Facilities Cost

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Table 2.15 Dreciation of Supporting Equipment (continued)

Year 9 Year 10
Equipments Salvage Salvage
Depreciation Depreciation
Value Value
(Rp) (Rp)
(Rp) (Rp)
Computers 6,973,569 62,762,119 6,276,212 56,485,907
Faximiles 71,027 639,244 63,924 575,319
Photocopy + Scanner
3,658,971 32,930,742 3,293,074 29,637,667
Machine
Clock 12,914 116,226 11,623 104,604
Printer 193,710 1,743,392 174,339 1,569,053

Director Desk & Chair 439,077 3,951,689 395,169 3,556,520

Meeting Chair 1,515,245 13,637,201 1,363,720 12,273,481

Meeting Desk 413,249 3,719,237 371,924 3,347,313
Office Desk & Chair 2,172,783 19,555,049 1,955,505 17,599,544
Sofa 344,374 3,099,364 309,936 2,789,428
Filling Cabinet 3,113,139 28,018,250 2,801,825 25,216,425
Whiteboard 53,808 484,276 48,428 435,848
CCTV (4 pcs/set) 1,399,018 12,591,166 1,259,117 11,332,049
Projector Set 1,549,682 13,947,138 1,394,714 12,552,424
Absence Machine 86,093 774,841 77,484 697,357
Pantry Utensils 129,140 1,162,261 116,226 1,046,035
Dispenser 144,637 1,301,733 130,173 1,171,560
Toilet Set 1,355,972 12,203,745 1,220,375 10,983,371
Neon Lamp 47,782 430,037 43,004 387,033
Generator Diesel 5,002,502 45,022,522 4,502,252 40,520,270
Trash can 125,912 1,133,205 113,320 1,019,884
Air Conditioner 2PK 1,218,437 10,965,937 1,096,594 9,869,343
Telephone 140,332 1,262,991 126,299 1,136,692
LED TV 32" 209,638 1,886,738 188,674 1,698,064
Total Supporting
30,371,011 273,339,102 27,333,910 246,005,192
Facilities Cost

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Table 2.28 Depreciation of Building

Year 1 Year 2 Year 3 Year 4
Initial Value
Components Salvage Salvage Salvage Salvage
(Rp) Depreciation Depreciation Depreciation Depreciation
Value Value Value Value
(Rp) (Rp) (Rp) (Rp)
(Rp) (Rp) (Rp) (Rp)

Plant
Building 2,450,000,000 73,500,000 2,376,500,000 71,295,000 2,305,205,000 69,156,150 2,236,048,850 67,081,466 2,168,967,385
Area

Office
Building 720,000,000 21,600,000 698,400,000 20,952,000 677,448,000 20,323,440 657,124,560 19,713,737 637,410,823
Area

Parking Area 371,250,000 11,137,500 360,112,500 10,803,375 349,309,125 10,479,274 338,829,851 10,164,896 328,664,956

Other Rooms
Building 2,340,900,000 70,227,000 2,270,673,000 68,120,190 2,202,552,810 66,076,584 2,136,476,226 64,094,287 2,072,381,939
Area

Road & Land

550,000,000 16,500,000 533,500,000 16,005,000 517,495,000 15,524,850 501,970,150 15,059,105 486,911,046
Treatment

Total 6,432,150,000 192,964,500 6,239,185,500 187,175,565 6,052,009,935 181,560,298 5,870,449,637 176,113,489 5,694,336,148

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Table 2.16 Depreciation of Building (continued)

Year 5 Year 6 Year 7 Year 8

Components Salvage Salvage Salvage Salvage

Depreciation Depreciation Depreciation Depreciation
Value Value Value Value
(Rp) (Rp) (Rp) (Rp)
(Rp) (Rp) (Rp) (Rp)

Plant
Building 65,069,022 2,103,898,363 63,116,951 2,040,781,412 61,223,442 1,979,557,970 59,386,739 1,920,171,231
Area

Office
Building 19,122,325 618,288,499 18,548,655 599,739,844 17,992,195 581,747,648 17,452,429 564,295,219
Area

Parking Area 9,859,949 318,805,007 9,564,150 309,240,857 9,277,226 299,963,631 8,998,909 290,964,722

Other Rooms
Building 62,171,458 2,010,210,481 60,306,314 1,949,904,166 58,497,125 1,891,407,041 56,742,211 1,834,664,830
Area

Road & Land

14,607,331 472,303,714 14,169,111 458,134,603 13,744,038 444,390,565 13,331,717 431,058,848
Treatment

Total 170,830,084 5,523,506,063 165,705,182 5,357,800,882 160,734,026 5,197,066,855 155,912,006 5,041,154,849

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Table 2.16 Depreciation of Building (continued)

Year 9 Year 10
Salvage Salvage
Components Depreciation Depreciation
Value Value
(Rp) (Rp)
(Rp) (Rp)

Plant Building Area 57,605,137 1,862,566,094 55,876,983 1,806,689,111

Office Building Area 16,928,857 547,366,362 16,420,991 530,945,371

Parking Area 8,728,942 282,235,781 8,467,073 273,768,707

Other Rooms Building

55,039,945 1,779,624,885 53,388,747 1,726,236,139
Area
Road & Land
12,931,765 418,127,082 12,543,812 405,583,270
Treatment
Total 151,234,645 4,889,920,204 146,697,606 4,743,222,598

From the calculation, total depreciation per year can be presented as below.

Table 2.29 Total Depreciation

TOTAL DEPRECIATION
End of Year Total Depreciation (Rp)
2019 1,309,357,415
2020 1,191,929,189
2021 1,085,838,560
2022 989,963,924
2023 903,295,476
2024 824,924,035
2025 754,030,994
2026 689,879,276
2027 631,805,189
2028 579,211,095
Total Depreciation 8,960,235,154

The salvage value in the year 2028 is Rp 8,635,844,001

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2.2.2.2 Labor Tax and Insurance

According to government policy PPh pasal 21, every payroll need to be
taxed. This calculation based on UU no 36 tahun 2008. The amount of tax is
classified by its annual taxable income.

Table 2.30 Tax Tarrif

Annual Earning (Rp) Tax Tariff

0-50 million 0.05

50 - 250 million 0.15

250 - 500 million 0.25

>500 million 0.3

This type of income has calculated the amount of insurance per worker
which is 3% of the workers wage according to Jamsostek (Jaminan Pemeliharaan
Kesehatan) and position cost (5% bruto income). Based on the annual income, the
amount of tax labor tax is as followed.

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Table 2.31 Direct Labor Tax and Insurance

Direct Labor

Monthly Net Net Salary Total Total Salary

Bruto Position Taxable
Amount Salary per Insurance Income Income Tax Per Insurance Tax per
Position Income Cost Income
(person) Person (Rp) per Month per Year Year per Year Year
(Rp) (Rp) (Rp)
(Rp) (Rp) (Rp) (Rp) (Rp) (Rp)

Warehouse
7 4,600,000 138,000 4,738,000 236,900 4,501,100 54,013,200 13,200 660 11,592,000 4,620
man

Operator 12 4,600,000 138,000 4,738,000 236,900 4,501,100 54,013,200 13,200 660 19,872,000 7,920

Driver 3 4,600,000 138,000 4,738,000 236,900 4,501,100 4,013,200 13,200 660 4,968,000 1,980

Controller 3 7,000,000 210,000 7,210,000 360,500 6,849,500 82,194,000 28,194,000 1,409,700 7,560,000 4,229,100

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Table 2.32 Indirect Labor Tax and Insurance

Indirect Labor

Net Total Total

Monthly Bruto Position Net Income Taxable Salary Tax
Amount Insurance Income Insurance Salary Tax
Position Salary per Income Cost per Year Income Per Year
(person) (Rp) per Month per Year per Year
Person (Rp) (Rp) (Rp) (Rp) (Rp) (Rp)
(Rp) (Rp) (Rp)

President
1 30,000,000 900,000 30,900,000 1,545,000 29,355,000 352,260,000 298,260,000 44,565,000 10,800,000 44,565,000
Director
Secretary of
President 1 17,000,000 510,000 17,510,000 875,500 16,634,500 199,614,000 145,614,000 16,842,100 6,120,000 16,842,100
Director
Engineering
and
1 15,000,000 450,000 15,450,000 772,500 14,677,500 176,130,000 122,130,000 13,319,500 5,400,000 13,319,500
Maintenance
Manager
Head of
Electrical
and 1 9,000,000 270,000 9,270,000 463,500 8,806,500 105,678,000 51,678,000 2,751,700 3,240,000 2,751,700
Instrumentati
on

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Table 2.20 Indirect Labor Tax and Insurance (continued)

Indirect Labor

Net Total Total

Monthly Bruto Position Net Income Taxable Salary Tax
Amount Insurance Income Insurance Salary Tax
Position Salary per Income Cost per Year Income Per Year
(person) (Rp) per Month per Year per Year
Person (Rp) (Rp) (Rp) (Rp) (Rp) (Rp)
(Rp) (Rp) (Rp)

Head of 1 9,000,000 270,000 9,270,000 463,500 8,806,500 105,678,000 51,678,000 2,751,700 3,240,000 2,751,700
Maintenance
Production
1 17,500,000 525,000 18,025,000 901,250 17,123,750 205,485,000 151,485,000 17,722,750 6,300,000 17,722,750
Manager
Head of
Process 1 12,500,000 375,000.00 12,875,000 643,750 12,231,250 146,775,000 92,775,000 8,916,250 4,500,000 8,916,250
Engineer
Head of
1 9,000,000 270,000 9,270,000 463,500 8,806,500 105,678,000 51,678,000 2,751,700 3,240,000 2,751,700
Utilities
Quality
Control 1 15,000,000 450,000 15,450,000 772,500 14,677,500 176,130,000 122,130,000 13,319,500 5,400,000 13,319,500
Manager
Head of
Research and 1 9,000,000 270,000 9,270,000 463,500 8,806,500 105,678,000 51,678,000 2,751,700 3,240,000 2,751,700
Development

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Table 2.20 Indirect Labor Tax and Insurance (continued)

Indirect Labor

Net Total Total

Monthly Bruto Position Net Income Taxable Salary Tax
Amount Insurance Income Insurance Salary Tax
Position Salary per Income Cost per Year Income Per Year
(person) (Rp) per Month per Year per Year
Person (Rp) (Rp) (Rp) (Rp) (Rp) (Rp)
(Rp) (Rp) (Rp)

Head of
Quality
1 9,000,000 270,000 9,270,000 463,500 8,806,500 105,678,000 51,678,000 2,751,700 3,240,000 2,751,700
Control and
Laboratory
Finance and
Marketing 1 15,000,000 450,000 15,450,000 772,500 14,677,500 176,130,000 122,130,000 13,319,500 5,400,000 13,319,500
Manager
Head of
1 7,000,000 210,000 7,210,000 360,500 6,849,500 82,194,000 28,194,000 1,409,700 2,520,000 1,409,700
Marketing
Head of
1 9,000,000 270,000 9,270,000 463,500 8,806,500 105,678,000 51,678,000 2,751,700 3,240,000 2,751,700
Finance
Administrati
1 15,000,000 450,000 15,450,000 772,500 14,677,500 176,130,000 122,130,000 13,319,500 5,400,000 13,319,500
on Manager
Head of
Human
1 8,000,000 240,000 8,240,000 412,000 7,828,000 93,936,000 39,936,000 1,996,800 2,880,000 1,996,800
Resource
Development
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Table 2.20 Indirect Labor Tax and Insurance (continued)

Indirect Labor

Net Total Total

Monthly Bruto Position Net Income Taxable Salary Tax
Amount Insurance Income Insurance Salary Tax
Position Salary per Income Cost per Year Income Per Year
(person) (Rp) per Month per Year per Year
Person (Rp) (Rp) (Rp) (Rp) (Rp) (Rp)
(Rp) (Rp) (Rp)

Head of
Health and
1 10,000,000 300,000 10,300,000 515,000 9,785,000 117,420,000 63,420,000 4,513,000 3,600,000 4,513,000
Safety
Environment
Supply
Chain 1 15,000,000 450,000 15,450,000 772,500 14,677,500 176,130,000 122,130,000 13,319,500 5,400,000 13,319,500
Manager

Clinic 3 7,000,000 210,000 7,210,000 360,500 6,849,500 82,194,000 28,194,000 1,409,700 7,560,000 4,229,100

Head of
2 5,000,000 150,000 5,150,000 257,500 4,892,500 58,710,000 4,710,000 235,500 3,600,000 471,000
Security
-
Security 6 4,500,000 135,000 4,635,000 231,750 4,403,250 52,839,000 - - 9,720,000

Receptionist 2 4,700,000 141,000 4,841,000 242,050 4,598,950 55,187,400 1,187,400 59,370 3,384,000 118,740

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Table 2.20 Indirect Labor Tax and Insurance (continued)

Indirect Labor

Net Total Total

Monthly Bruto Position Net Income Taxable Salary Tax
Amount Insurance Income Insurance Salary Tax
Position Salary per Income Cost per Year Income Per Year
(person) (Rp) per Month per Year per Year
Person (Rp) (Rp) (Rp) (Rp) (Rp) (Rp)
(Rp) (Rp) (Rp)

Cleaning
10 4,500,000 135,000 4,635,000 231,750 4,403,250 52,839,000 - - 16,200,000 -
Service

Office
4 4,500,000 135,000 4,635,000 231,750 4,403,250 52,839,000 - - 6,480,000 -
Boy/Girl

The total of labor salary tax to be paid annually is Rp 188,135,760

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 Insurance
Insurance is the cost which is paid by cooperated insurance company to
the worker. Insurance is needed as a way to protect the assets of company,
including variable assets and fixed assets which is calculated by multiplying total
depreciable capital with 0.5%.

Table 2.33 Plant Insurance Based on Depreciation

Measurement 0.005 of TDC

Year Total Depreciable Capital (Rp) Amount of Insurance (Rp)

2019 16,286,721,739.32 81,433,608.70

2020 15,094,792,550.39 75,473,962.75

2021 14,008,953,990.80 70,044,769.95

2022 13,018,990,066.31 65,094,950.33

2023 12,115,694,590.02 60,578,472.95

2024 11,290,770,555.46 56,453,852.78

2025 10,536,739,561.62 52,683,697.81

2026 9,846,860,285.31 49,234,301.43

2027 9,215,055,096.24 46,075,275.48

2028 8,635,844,000.89 43,179,220.00

TOTAL 600,252,112.18

2.2.2.3 Building Tax

Building tax is meant for the building and the land. The value is
calculated by using method that is ruled in government’s law based on Pasal 6
ayat (3) Undang-undang Nomor 12 Tahun 1985 tentang Pajak Bumi dan
Bangunan that change according Undang-undang Nomor 12 Tahun 1994.

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Table 2.34 Building Tax Estimation

Description Area (m2) Price (Rp) Total Price (Rp)

NJOP Earth 2750 1,600,000 4,400,000,000

NJOP Building 1004.54 2,000,000 2,009,080,000

Total NJOP 6,409,080,000

NJOPTKP 12,000,000

NJOP for PBB 6,397,080,000

NJKP (40% NJOP) 2,558,832,000

Debted PBB (0.5 NJKP) (Rp) 12,794,160

2.2.3 General Expenses

General expense is an expenses related to the routine expenses of a plant
office to support the operational activity of the plant. The component in general
expenses are communication cost, annual research and development cost, annual
distribution cost, and annual financial interest cost for 10 years of life expectancy.

2.2.3.1 Communication Expenses

The communications cost is one of the components in general expenses.
This calculation is useful for determining the cost of supporting offices in
communicating with outside parties such as suppliers or distributors.
Table 2.35 Building Tax Estimation
Communication Cost

Component Cost/year (Rp)

Internet & Telephone Connection 102,000,000.00

Total Communication Cost 102,000,000.00

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2.2.3.2 Marketing Cost

The purpose of marketing is to introduce a product to the consumers or to
catch the attention of consumers. Marketing is also used to maintain the image
and to sell a certain brand. Before determining the marketing cost, marketing
startegy must be developed and arranged. One of the best ways to get consumers’
attention is by advertising. From advertisement, consumer will gain some
informations regarding Biocharming product. An advertisment can be categorized
as good advertisement based on its effectiveness. The media selected for
advertisement is decided by target market. Biocharming product market target is
focused on fruit farmers in Malang. The advertisement will be done through
printed media which are usually read by fruit farmers and electronic to reach
larger audience.

• Printed Media
Printed media is the commonly used media for advertisement. For the
printed media, newspaper and common magazine is selected. Another form of
printed media used is billboard. The advertisement board will be erected around
busy roads in Malang and connecting city.

Table 2.36 Printed Advertisement Cost

Printed Advertisement Cost

Time
Printed Media Type Dimension Cost per Dimension Total Cost
(day)

Majalah TRUBUS Display Full Color 9 cm x 12 cm Rp 3,000,000 30 Rp 3,000,000

Koran Kompas Display Full Color 810 mmk Rp 215 12 Rp 2,580

Billboard Display Full Color 3m x 1m x 1mk Rp 36,500,000 365 Rp 36,500,000

Total Printed Advertisement Cost Rp 39,502,580

• Electronic Media & Trade Fairs

Electronic media can also help to advertise Biocharming product.
Nowadays, most people’s activity utilize the usage of internet. Therefore, website

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is used as other platform to promote Biocharming product. It also allows better

access of information for the consumers.

Table 2.37 Online Media Cost

Online Media Cost

Types Cost (Rp)

Creating Website Cost Rp 200,000

Annual Cost Rp 1,390,000

Social Media (Fanpage FB, Twitter, line,

Rp -
Instagram)

TOTAL Rp 1,590,000

2.2.3.3 Distribution Cost

Distribution cost is a cost which is needed to distribute the products.
Distribution cost is influenced by the distribution plan developed in supply chain.
The distribution cost can be divided into cost from plant to distribution center and
cost from distribution center to wholesaler.

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Table 2.38 Distribution Cost

Distribution Cost

Solar Highways Fee Total Cost

Amount Number Distance Total Cost per Year
Route Pathway Frequency Consumption per Month per Month
(Ton) of Truck (km) (Rp)
(L) (Rp) (Rp)

Kebomas -
Bululawang (Malang) - Every
Land 10.6722336 3 122 17 84,000 1,161,085.71 13,933,028.57
Klojen (Malang) 1 - week
Klojen (Malang) 2

Kebomas - Gedung
Graha Sarana (Gresik)
Every
- Villa Bukit Mas Paris Land 8.9098464 2 30 4 56,000 232,571.43 2,790,857
week
(Surabaya) - Gedung
Yosindo (Surabaya)

Total Distribution Cost (Rp) 16,723,886

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2.3 Economic Analysis

After determining and classifying cost and expenses that are needed to build
the plant, start the production and produce the product annually, in this part the
data obtained will be calculated the selling price of product, cash flow, and the
cost breakdown of the product.

2.3.1 Product Pricing Per Unit

Product pricing per unit is determined by doing goal seek in Microsoft
Excel using the cash flow table on the next section. The calculation is done by
changing the product pricing until net present value (NPV) is equal to zero.
Before calculating NPV, value of Minimum Attractive Rate of Return (MARR)
must be determined from Weighted Average Cost of Capital (WACC).

MARR is the minimum rate of return on a project a manager or company

is willing to accept before starting a project, given its risk and the opportunity cost
of forgoing other project. WACC is the rate that company is expected to pay on
average to all its security holders to finance its assets. WACC can be calculated
by using equation:

( ) ( ( ))

Information:

 Re is cost of equity

 Rd is cost of debt

 E/(E+D) is % financing for equity

 D/(E+D) is % financing for debt

Below in Table 2.39 shown the WACC calculation for the product.
Table 2.39 Parameter for WACC calculation
E/(E+D) D/(E+D) Re Rd Tax Rate WACC % WACC
62% 38% 13% 9% 8% 0.110557 11%

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Based on calculation, WACC has a value of 11% which will be used as

MARR value (MARR=WACC). After MARR is determined, minimum product
price can be calculated and the results is shown on Table 2.40

Table 2.40 Minimum and Product Price Table Calculation

Parameter Biocharcoal Foliar

WACC 11% 11%
MARR 11% 11%
NPV 0% 0%
IRR 11% 11%
Minimum Price Rp 24,944.02 Rp 53,729.23
Product Price Rp 30,000.00 Rp 65,000.00
Profit Margin 20% 21%

The actual product selling price will be Rp 30,000 for Biocharcoal with
profit margin of 20%. and Rp 65,000.00 for Foliar with profit margin of 21%.

2.3.2 Cash Flow

Cash flow is the net amount of cash and cash-equivalents being transferred
into and out of a business. Cash flow is used to analyse the liquidity position of
the company. Liquidity describes the degree to which an asset or security can be
quickly bought or sold in the market without affecting the asset's price.
Cash flow will give a bigger picture of the amount of cash coming into the
business, from where, and amount flowing out. The sources of income in
cashflow are revenue and salvage value. Meanwhile, the sources of outcome are
capital investment, operational and maintenance cost, and financial interest.
Positive cash flow indicates that a company's liquid assets are increasing, enabling
it to settle debts, reinvest in its business, return money to shareholders, pay
expenses and provide a buffer against future financial challenges.

The cash flow calculation is shown in Table 2.41.

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% Biocharcoal Foliar Maintenance Cash All

Year Revenue OPEX Depreciation
Capacity Price Price Cost Expenses Expenses
2018 0% - - - - - -

2019 85% 13,484,561,500.00 11,580,125,624.92 99,598,300.00 823,424,557.35 11,679,723,924.92 12,503,148,482.28

2020 95% 15,070,980,500.00 11,208,005,219.20 99,598,300.00 754,589,616.62 11,307,603,519.20 12,062,193,135.82

2021 100% 15,864,190,000.00 10,836,196,596.84 99,598,300.00 692,232,944.50 10,935,794,896.84 11,628,027,841.35

15,864,190,000.00 99,598,300.00
2022 100% 10,464,720,544.85 635,718,870.92 10,564,318,844.85 11,200,037,715.77
15,864,190,000.00 99,598,300.00
2023 100% 30,000.00 65,000.00 10,093,450,712.57 584,474,928.06 10,193,049,012.57 10,777,523,940.63
15,864,190,000.00 99,598,300.00
2024 100% 9,722,463,327.23 537,985,541.17 9,822,061,627.23 10,360,047,168.39
15,864,190,000.00 99,598,300.00
2025 100% 9,720,034,395.48 495,786,349.78 9,819,632,695.48 10,315,419,045.26
15,864,190,000.00 99,598,300.00
2026 100% 9,717,747,099.99 457,459,096.66 9,817,345,399.99 10,274,804,496.65
99,598,300.00
2027 95% 15,070,980,500.00 9,715,633,964.86 422,627,027.39 9,815,232,264.86 10,237,859,292.24

2028 90% 14,277,771,000.00 9,713,729,211.11 99,598,300.00 390,950,749.83 9,813,327,511.11 10,204,278,260.94

Table 2.41 Cash Flow Table

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Table 2.41 Cash Flow Table

Gross Profit Net Profit Before Tax Net Profit After Tax Cash Flow Cummulative Cash Flow
(Rp) (Rp) (Rp) (Rp) (Rp)
13,890,817,830.00 13,890,817,830.00 13,890,817,830.00 13,890,817,830.00 13,890,817,830.00
1,804,837,575.08 981,413,017.72 736,059,763.29 1,559,484,320.64 12,331,333,509.36
3,763,376,980.80 3,008,787,364.18 2,256,590,523.14 3,011,180,139.75 9,320,153,369.60
4,928,395,103.16 4,236,162,158.65 3,177,121,618.99 3,869,354,563.50 5,450,798,806.11
5,299,871,155.15 4,664,152,284.23 3,498,114,213.18 4,133,833,084.09 1,316,965,722.01
5,671,140,987.43 5,086,666,059.37 3,814,999,544.53 4,399,474,472.59 3,082,508,750.57
6,042,128,372.77 5,504,142,831.61 4,128,107,123.71 4,666,092,664.87 7,748,601,415.45
6,044,557,304.52 5,548,770,954.74 4,161,578,216.05 4,657,364,565.84 12,405,965,981.29
6,046,844,600.01 5,589,385,503.35 4,192,039,127.51 4,649,498,224.17 17,055,464,205.46
5,255,748,235.14 4,833,121,207.76 3,624,840,905.82 4,047,467,933.20 21,102,932,138.66
15,805,944,380.13 4,073,492,739.06 3,055,119,554.30 14,787,571,195.36 24,549,002,442.79

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The before and after tax cash flow can be seen in the graph below

CASH FLOW
IDR 20,000,000,000

IDR 15,000,000,000

IDR 10,000,000,000

IDR 5,000,000,000

IDR 0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
-IDR 5,000,000,000

-IDR 10,000,000,000

-IDR 15,000,000,000

-IDR 20,000,000,000
Year

Before Tax Cash Flow After Tax Cash Flow

Figure 2. 1 Before and After Tax Cash Flow

The cumulative cash flow can be seen in the graph below

Cummulative After Tax Cash Flow

IDR 30,000,000,000

IDR 25,000,000,000

IDR 20,000,000,000

IDR 15,000,000,000

IDR 10,000,000,000

IDR 5,000,000,000

IDR 0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
-IDR 5,000,000,000

-IDR 10,000,000,000

-IDR 15,000,000,000

-IDR 20,000,000,000

Figure 2. 2 Cummulative Cash Flow

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2.3.3 Cost Breakdown

Cost breakdown aims to determine the percentage of each expenditure
made. By using the cost breakdown diagram, companies can determine which
variables are most widely affected production expenditure. The data for cost
breakdown calculation is shown in table and diagram below.

The graph that indicates the cost breakdown is shown below.

0%
0% 1%
0% Cost Breakdown
5%
1%
Total Investment Cost
0% Labour Salary

2% 16% Raw Material

9% Utilities
Tax
19% Insurance
Communication Cost
47%
Distribution Cost
Publication and Advertising
Depreciation

Figure 2. 3 Cost Breakdown Diagram

Based on the diagram above, variable that determine the product’s price
most is labour salary. The cost of labour salary covers 47% of the total operating
cost. The second biggest variable is the raw material for workers with consist up
to 19% of total operating cost. This result indicates that the parameter that’s most
sensitive in the total operating cost is affected by the salary of the labour. Further
analysis will be done in Sensitivity Analysis.

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PROFITABILITY AND SENSIBILITY ANALYSIS

This section will explain about the profitability of the project for ten years
of production. The profitability will be evaluated by four parameters which are
Rate of Investment (ROI), Pay Back Period, Break Even Point, Internal Rate of
Return and Net Present Value (NPV). These parameters will give each value for
the project. From this value, the profitability of the project can be analyzed so the
product sold attracted investors or bank that will give investment and loan.

3.1 Return of Investment

Return of Investment (ROI) is the percentage of annual profit as regard with
the first invested capital cost or the yearly profit divided by the total initial
investment necessary. The formula to calculate the value of of ROI is shown
below:

( )

The amount of annual net profit is Rp5,260,204,897 while the amount of

total capital investment is Rp26,315,876,511. Therefore, the calculation of ROI
for the plant is shown as follow:

( )

Based on the calculation, the amount of ROI is 18.92% . This value

represents the rate of the return of investment for the investor each year.

3.2 Payback Period

Payback period is length of time in years the investment and loan will be
return to the investors and banks. This value is important because investors and
banks want to have money back as quickly as it can. This value is determined
before the investors and banks give the money to the project. The formula to
calculate payback period is shown below:
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 ( )

If the payback period exceeds the arranged period, the project will be
rejected, if not it is accepted and will be given an investment or loan. The payback
period ignores the time value of money, unlike other methods of capital
budgeting, suchas net present value, internal rate of return or discounted cash
flow.
The cumulative present value from year one on to year two and so on until
year ten is calculated. Longer payback periods are not typically desirable for
investment positions. Based on assumptions, the payback period is calculated as
follows:

Table 3.1 Cash Flow and Cummulative Cash Flow

Cummulative Cash Flow

Year Cash Flow (IDR)
(IDR)

0 - 13.890.817.830,00 - 13.890.817.830,00
1 1.559.484.320,64 - 12.331.333.509,36
2 3.011.180.139,75 - 9.320.153.369,60
3 3.869.354.563,50 - 5.450.798.806,11
4 4.133.833.084,09 - 1.316.965.722,01
5 4.399.474.472,59 3.082.508.750,57
6 4.666.092.664,87 7.748.601.415,45
7 4.657.364.565,84 12.405.965.981,29
8 4.649.498.224,17 17.055.464.205,46
9 4.047.467.933,20 21.102.932.138,66
10 14.787.571.195,36 24.549.002.442,79

The precise calculation of payback period time is done by using linear

interpolation method between the year 4 and year 5 as follows. From the
interpolation, the payback period is 4.339 years or equals to 1584 days.

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 3.3 Break Even Point
Breakeven point is the analysis to find the amount of how many product to
be sold to customers at given price in order to cover the total investment. This is
corresponding to the analysis of payback period. The formula to calculate Break
Even Point is:

( )

Table 3.2 Break Even Point Calculation

Cummulative of
Sold Product Sold Product
Years Biocharcoal Foliar sold products
(%) (units)
(unit)
1 10.421 202.645,1 100% 213.067,1 213.067,1
2 10.421 202.645,1 100% 213.067,1 426.134,2
3 10.421 202.645,1 100% 213.067,1 639.201,3
4 10.421 202.645,1 100% 213.067,1 852.268,4
4,339381 10.421 202.645,1 100% 213.067 1.065.336

Based on the calculation in the table 3.1, for a payback period of 1584 days
the BEP is reached when the plant has produced about 1,065,336 products.

3.4 Internal Rate of Return

Internal rate of return is the maximum interest rate paid on a project that can
still be breakeven at the end of the project life. In other words, internal rate of
return is the interest if the net present value equals to zero.

∑
( )

The calculation of IRR is done with the aid of Microsoft Excel, because it
already has a function to calculate IRR for economic analysis. Based on the
calculation in Microsoft Excel, the obtained IRR is 24%.

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 The value of IRR must be compared with the MARR that has been
calculated previously to analyze the feasibility of this project. A project can be
determined as a feasible project if the IRR value is greater than MARR value.
From the previous chapter, the value of MARR is 11%. If the MARR and IRR
value get compared, it can be concluded that the IRR value is greater than the
value of MARR. Therefore, the plant is a feasible and acceptable project because
it is considered as an interesting project and can give proper profit for the
investor.
3.5 Net Present Value
Net Present Value (NPV) shows the net benefits received by a project over
the life of the project at a certain interest rate as viewed in the present. NPV can
also be interpreted as the present value of the cash flows generated by the
investment. In calculating the NPV is necessary to determine the relevant interest
rate. In this calculation, the interest rate used is the interest rate on the bank loan
for start-up capital which is 9.95% for Mandiri Bank. The formula is shown
below:

( )

A project as feasible if the NPV > 0, which means the project is profitable
or provide benefits if implemented. If NPV < 0, the project is not reliable and
feasible to run because it does not generate profit. The NPV value of Biocharming
product manufacture is calculated by Excel according to the cash flow after tax
that is Rp 10,510,767,951.
3.6 Sensitivity Analysis
The values of the parameters in engineering economics usually is estimated,
consequently these values have an error factor. May be greater or smaller than the
estimation obtained or changed at certain moments. Changing in parameter values
will lead the change in the results shown by an alternative investment. This
change allows the decision to change from one alternative to another alternative.
If the changing in the factors or parameters influence in choosing the decision,

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then the decision is called to be sensitive to changes the value of the parameter or
factor.
To determine how sensitive a decision to the changing factors or parameters
that influence the decision-making should be accompanied by a sensitivity
analysis. Sensitivity analysis will provide an overview of the extent to which a
decision will be consistent despite the change in the factors or parameters that
influence it.
Sensitivity analysis is done by changing the value of a parameter at a time to
see how it affects the subsequent acceptability of an alternative investment. The
parameters are usually changed and the changing may affect the decision is the
cost of investment, cash flow, residual value, interest rates, tax rates, and the
others.
Sensitivity analysis is an analysis tool to see the feasibility of investment
decision if the influence factors or parameters changed. Decision is called
sensitive decisions when each change parameter values or factor calculation will
change investment decisions. The parameters are usually changed and the
changing can affect investment decisions is the cost of investment, cash flow,
residual value, interest rate, tax rate and so on.
3.6.1 Production Price Fluctuation
This type of sensitivity analysis was performed based on the fluctuation of
product sales price that is decrease and increase. The selling price of products is
one of the most important variable that can affect the stability of production
because these variables will determine the revenue and profit to be earned by the
industry. The parameter which is observed in this calculation is the change in
economic viability parameter such as NPV, IRR, and PBP if there is a decline in
the level of product sales. When a decline in the selling price is occur, the
percentage of IRR obtained will be smaller, which means the rate of return will
become longer until it is undefined. On the other hand, it is known that lower
selling price will cause a longer payback period. The calculation of this analysis is
shown in the table below.

Table 3.3 Sensitivity Analysis Product Price (Biochar)

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 Sensitivity Analysis Product Price (Biochar)
Change Product Price per IRR NPV PP (years)
Unit(Rp)
-15% 25.500,00 13,0% Rp 1.412.304.900 6,9
-10% 27.000,00 17,0% Rp 4.445.125.917 5,75
-5% 28.500,00 20,0% Rp 7.477.946.934 4,94
0% 30.000,00 24,0% Rp 10.510.767.951 4,34
5% 31.500,00 28,0% Rp 13.543.588.968 3,87
10% 33.000,00 31,0% Rp 16.576.409.986 3,49
15% Rp 34.500,00 35,0% Rp 19.609.231.003 3,19
Table 3.4 Sensitivity Analysis Product Price (Foliar)
Sensitivity Analysis Product Price (Foliar)
Change Product Price per Unit IRR NPV PP (years)
(Rp)
-15% 55.250,00 13,0% Rp 1.412.304.900 6,9
-10% 58.500,00 17,0% Rp 4.445.125.917 5,75
-5% 61.750,00 20,0% Rp 7.477.946.934 4,94
0% 65.000,00 24,0% Rp 10.510.767.951 4,34
5% 68.250,00 28,0% Rp 13.543.588.968 3,87
10% 71.500,00 31,0% Rp 16.576.409.986 3,49
15% 74.750,00 35,0% Rp 19.609.231.003 3,19

3.6.2 Raw Material Cost Changes

Sensitivity analysis was also performed on the change of the raw material
costs of this product. Change of cost that influences production activities can also
affect the NPV value. If the cost increase, NPV value tends to be smaller, while if
the cost decrease, otherwise will happen. Along with NPV, IRR will also decrease
by the change or increase in cost. A longer payback period will also be obtained if
the cost that influences production process increase.
A feasible factory is a factory that can’t be easily swayed by the change in
these costs despite in the cost breakdown it can be seen that production process
definitely influenced by the cost of raw materials. The calculation of raw material
costs fluctuation is shown in the table below.
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 Table 3.5 Sensitivity Analysis Raw Material
Sensitivity Analysis Operational Cost (Raw Material)
Change Raw Material (Rp) IRR NPV PP (years)
-15% 1.873.096.396,29 26,0% Rp 11.826.081.854 4,12
-10% 1.983.278.537,25 25,0% Rp 11.387.643.887 4,19
-5% 2.093.460.678,21 25,0% Rp 10.949.205.920 4,26
0% 2.203.642.819,16 24,0% Rp 10.510.767.951 4,34
5% 2.313.824.960,12 24,0% Rp 10.072.329.985 4,42
10% 2.424.007.101,08 23,0% Rp 9.633.892.017 4,49
15% 2.534.189.242,04 22,0% Rp 9.195.454.050 4,58
3.6.3 Operational Cost Changes
This sensitivity analysis was performed on the change of the operational
costs of the product. Changes in the variable labor costs are one of the variables
that affect the cost of production in the factory so that it can be used to analyze the
stability of the project. The observed parameter in this analysis is also the change
in economic viability parameter (NPV, PBP, and IRR). The increase in operating
expenses to support the production activities will cause a change in NPV. NPV
value will be smaller by the increase of operational costs. The change in
operational cost will also cause the change in IRR value. Increasing labor cost or
operating cost will decrease the value of IRR. Lower IRR value means that the
return will be smaller (become less profitable). Aside from NPV and IRR, PBP
value will also change as the result of change in labor cost. PBP tends to be longer
if the labor cost increases. The calculation of operational labor costs fluctuation is
shown in the table below.

Table 3.6 Sensitivity Analysis Salary

Sensitivity Analysis Operational Cost (Salary)
Change Labor Cost (Rp) IRR NPV (RP) PP (years)
-15% 4.932.720.000,00 28,0% 13.974.591.385 3,81
-10% 5.222.880.000,00 27,0% Rp 12.819.983.574 3,97
-5% 5.513.040.000,00 26,0% Rp 11.665.375.763 4,14
0% 5.803.200.000,00 24,0% Rp 10.510.767.951 4,34
5% 6.093.360.000,00 23,0% Rp 9.356.160.140 4,55

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10% 6.383.520.000,00 21,0% Rp 8.201.552.329 4,78
15% 6.673.680.000,00 20,0% Rp 7.046.944.518 5,04

3.7 Fluctuational Graphics

The graphics shown below are described in three section. The first graphic
is about the IRR, the second graphic is about the NPV, and the third graphic is
about payback period.

3.7.1 Internal Rate of Return (IRR)

From the graphic below, it can be seen that the influence of operating
labors is not significant but it causes changes in IRR. The increase of product
price cause a bigger value of IRR while the increase of raw materials cost causes a
decreasing IRR

IRR
40.0%

35.0%

30.0%

25.0%

20.0%

15.0%

10.0%

5.0%

0.0%
-20% -15% -10% -5% 0% 5% 10% 15% 20%

Product Price Raw Material Salary

Figure 3. 1 IRR Graph Fluctuation

3.7.2 Net Present Value

From the graphic below, it can be seen that the influence of labor cost and
the raw material cost are not significant but it causes changes in NPV. Product
price cost caused NPV changed significantly. The increasing of product price
causes the increase of NPV, whereas the decrease of product price causes the
decrease of NPV.
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 NPV
Rp25,000,000,000

Rp20,000,000,000

Rp15,000,000,000

Rp10,000,000,000

Rp5,000,000,000

Rp-
-20% -15% -10% -5% 0% 5% 10% 15% 20%

Product Price Raw Material Salary

Figure 3. 2 NPV Graph Fluctuation

3.7.3 Payback Period

From the graphic below, it can be seen that the influence of labor cost and
raw material cost is not that significant but it causes changes in PBP. The product
price causes the highest changes of payback period. The increasing of product
price causes a decrease of PBP while the decreasing of product price will cause a
rise of PBP.

Payback Period
8

0
-20% -15% -10% -5% 0% 5% 10% 15% 20%

Product Price Raw Material Salary

Figure 3. 3 Payback Period Graph Fluctuation

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 CHAPTER 4
CONCLUSION

From this assignment, it is concluded that:

• Biocharming supplier comes from China and Indonesia. The suppliers are
selected based on the product availability, price, shipping cost, and period.

• The distribution of Biocharming will be in Malang area.

• The marketing of Biocharming will focused on conventional platform such as

newspaper, billboard, and magazine. Small fraction is given to promotion on
internet.

• The total capital investment of Biocharming is Rp 13,890,817,830.

• The total operational cost of Biocharming is Rp9,674,241,706.65 per year.

• The price for Biocharming biocharcoal is Rp30,000 per package while the foliar
cost Rp 65,000 per bottle.

• The MARR from the calculation is 12%.

• The rate of investment to be profitable is 22,87%.

• The payback period of Biocharming is 4.339 years.

• The breakeven point of Biocharming plant is 1,226.31 products.

• The internal rate of return of Biocharming to be profitable is 24%,

• The net present value of Biocharming to be profitable is Rp10,510,767,951.

• Biocharming has low sensitivity to its major cost. The most important aspect to
sensitivity for Biocharming is its product price and competition in market.

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