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UNIVERSITAS INDONESIA

SHOES’ SMELL REMOVER

Report Assignment 4

GROUP 15

GROUP PERSONNEL:
Ahmad Rafif (1506673265)
Dimas Rahadi P. (1506673473)
Kevin Julian (1506730262)
Salma Amaliani P. (1506673334)
Sarah Vania G. (1506673233)

CHEMICAL ENGINEERING DEPARTMENT


ENGINEERING FACULTY
DEPOK
MAY 2018

Universitas Indonesia
EXCECUTIVE SUMMARY

Supply chain management is critical to business success and essential to


reach customer satisfaction. To achieve the most efficient supply chain, there are
several parts of supply chain management that should be identified and managed
well, including supply chain strategy and network design, supply chain service
performance, supply chain costs, supplier performance, and also inventory
management. Those steps consist of planning, production, and distribution.
After considering those factors, PT. Adi Samavin plant location will be
located on Jl. Ciffest, Cikupa, Tangerang, Banten 15710 with the facilities of
electrical, water, human resources and road access. Most of raw materials that are
used in the process will be supplied by supplier in Indonesia near plant location.
Only organo alcoxy silane that is imported from China. All of the raw materials
will be supplied more than once a week, only nano silver and organo alcoxy silane
will be supplied once three months. For making sure the raw materials supply,
there will be a keep about 30% of every distribution capacity.
The distribution of 125 boxes ShoeCozy product will be distributed to 3
distributors in Jakarta, Bogor, Depok, Tangerang and Bekasi, with 20 bottles/box.
Marketing strategy if ShoeCozy is promotion via printed media, website, social
media. Total capital investment of PT. Adi Samavin includes equipment, land and
building, supporting facilities, utilities installation cost, market research cost,
licensing cost, indirect cost and working capital investment is Rp
2,564,368,149.00-, will be fully costed from bank with 9.75% interest.
Operational cost is Rp 2,685,144,928 a year.
Therefore, by simple calculation, the minimum price for ShoeCozy
product is Rp. 23,697.91, PT Adi Samavin chooses selling price of this product
will be Rp. 50,000 with marginal advantage of 111%. The assumption made about
the number of products sold per year: in the first year products sold is 60% of the
company production, in second year 70%, in third year 80%, and in fourth until
tenth year product sold is 90% of production capacity. WACC of chemical
specialty product is 14.56%. With assumption above, PT. Adi Samavin will use
14.65% as MARR value. This project have 66.5% rate of investment in 10 years
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project and payback period 634 days or 1.74 years. it can be concluded that this
Shoes’ Smell Remover Product can get its payback in period less than 4 years,
which is classified as intermediate time that is proper to recover the cost of
investment. So, the production is acceptable. The breakeven point when the plant
has produced about 215,500 cans.
The value of MARR is 14.86%. If we compare both value, it can be
concluded that the IRR value is greater than MARR value (58.5% > 14.86%).
Therefore, we can also conclude that PT. Adi Samavin plant is a feasible and
acceptable project because it is considered as an interesting project and can give
proper profit for the investor. This project also could be considered profitable if
it’s executed while if the NPV is less than zero it means that project is not
profitable to run. Also, if the NPV equals to zero, it means that the project won’t
result in any profit or loss. From the calculation with Microsoft Excel, the NPV is
obtained as Rp 6,758,518,962.07. Because the NPV is greater than zero, based on
NPV calculation it can be concluded that this project is profitable.
A sensitivity analysis is conducted to determine the effect of percentage
changes in pertinent variables on the profitability of the project. Such an analysis
indicates which variables are most susceptible to change and need further study
(Perry, 2007). From the graphic (will be showed in chapter 3), it can be seen that
the influence of labor cost and raw material but it causes changes in NPV. The
increasing of product price causes the increase of NPV, whereas the increase of
raw materials and labor salary cost causes a decline of NPV. The increase of
product price cause a bigger value of IRR while the increase of raw materials and
labor cost causes a decreasing IRR. Influence of labor cost and raw material cost
is not that significant, but it causes changes in PBP. The product price causes the
highest fluctuation at value about 1-4 years change of payback period.
Meanwhile, the fluctuation of raw material and labor cost cause the fluctuation 2-
3 years of payback period. The increasing of raw material cost causes a rise of
PBP while an increase of product price results in a decline of PBP.
Overall, this project has good feasibility and profitability because it has
competitive price benchmarked with competitor product and feasible to set high

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margin price. Therefore, this project is still profitable even raw material and labor
cost rising 15% and product price lowering 15%.
LIST OF CONTENTS

EXCECUTIVE SUMMARY................................................................................ii
LIST OF CONTENTS..........................................................................................iii
LIST OF FIGURES.............................................................................................vii
LIST OF TABLES.................................................................................................ix
CHAPTER 1 SUPPLY CHAIN...........................................................................11
1.1 Supply Chain Management.....................................................................11
1.2 Plant Location.........................................................................................12
1.3 Raw Material...........................................................................................14
1.3.1 Raw Material Supply.......................................................................14
1.3.2 Order Capacity.................................................................................20
1.4 Inventory.................................................................................................27
1.4.1 Raw Material Inventory...................................................................27
1.4.2 Product Inventory.............................................................................28
1.5 Product Distribution................................................................................28
1.5.1 Product Distribution Location..........................................................29
1.5.2 Proportion of Product Distribution..................................................32
1.5.3 Product Distribution from Plant to Customer..................................34
1.5.4 Mode of Transportation....................................................................37
1.6 Product Marketing...................................................................................37
CHAPTER 2 PRODUCT COSTING.................................................................39
2.1 Total Capital Investment.........................................................................40
2.1.1 Fixed Capital....................................................................................41
2.1.1.1 Direct Cost....................................................................................41
2.1.1.2 Indirect Cost.................................................................................49
2.1.1.3 Working Capital Investment.........................................................50
2.1.2 Total Capital Investment..................................................................50
2.2 Operational Cost......................................................................................52
2.2.1 Manufacturing Cost.........................................................................52
2.2.1.1 Direct Production Cost.................................................................52
2.2.2 General Expense..............................................................................72
2.3 Economic Analysis..................................................................................75
2.3.1 Capital Loan.....................................................................................75
2.3.2 Product Pricing.................................................................................76

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2.3.3 Cash Flow........................................................................................76
2.3.4 Cost Breakdown...............................................................................81
CHAPTER 3 PROFITABILITY AND SENSITIVITY ANALYSIS................83
3.1 Rate of Return/Return of Investment......................................................83
3.2 Payback Period........................................................................................83
3.3 Break Even Point.....................................................................................85
3.4 Internal Rate of Return............................................................................86
3.5 Net Present Value....................................................................................86
3.6 Sensitivity Analysis.................................................................................87
3.6.1 Selling Price Fluctuations................................................................87
3.6.2 Raw Material Cost Changes.............................................................88
3.6.3 Operational Cost Changes (Labor Cost Deviation).........................89
3.6.4 Fluctuation Graphics........................................................................89
3.6.4.1 Net Present Value.........................................................................90
3.6.4.2 Internal Rate of Return.................................................................91
3.6.4.3 Payback Period.............................................................................92
CHAPTER 4 CONCLUSION.............................................................................93
REFERENCES.....................................................................................................94

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LIST OF FIGURES

Figure 1.1 The Plant Location of ShoeCozy (PT. Adi Samavin)...........................10


Figure 1.2 Raw Material Inventory for 3 Months Activity....................................24
Figure 1.3 Products Inventory for One Month Activity.........................................25
Figure 1.4 Transportation Route............................................................................34
Figure 2.1 Bare Module Cost.................................................................................39
Figure 2.2 Percentage of Fixed Capital..................................................................49
Figure 2.3 Cashflow (prices are in million rupiah)................................................74
Figure 2.4 Cost Breakdown Diagram....................................................................79
Figure 3.1 Cummulative Cash Flow vs. Year for Payback Period Calculation.....82
Figure 3.2 Graphic of Net Present Value Fluctuation............................................87
Figure 3.3 Graphic of Intermal Rate of Return Fluctuation...................................88
Figure 3.4 Graphic of Payback Period Fluctuation................................................89

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LIST OF TABLES

Table 1.1 Comparison of Raw Material Supplier..................................................14


Table 1.2 Comparison of Packaging Raw Material Supplier.................................15
Table 1.3 Chosen Raw Materials Supplier.............................................................18
Table 1.4 Amount of Material per Order...............................................................20
Table 1.5 Raw Material Supply (1st-6th Month) Scheduling..................................22
Table 1.5 Raw Material Supply (7th-12th Month) Scheduling (Continued)............24
Table 1.6 Distributors Outlets Based on Regions..................................................29
Table 1.7 Proportion of Product Distribution........................................................33
Table 1.8 Distribution Center Location.................................................................34
Table 1.9 Product Distribution Cost.......................................................................35
Table 2.1 Marshall and Swift Chemical Equipment Cost Index............................41
Table 2.2 Forecasting Marshall and Swift’s Chemical Equipment Cost Index.....42
Table 2.3 Bare Modul1e Cost................................................................................42
Table 2.4 Land Cost...............................................................................................43
Table 2.5 Building Cost.........................................................................................43
Table 2.6 Supporting Facilities Investment Cost...................................................44
Table 2.7 Utilities Installation Cost.......................................................................45
Table 2.8 Market Research Cost............................................................................45
Table 2.9 Patent Fee Details...................................................................................46
Table 2.10 Brand Fee Details.................................................................................47
Table 2.11 Licensing Cost......................................................................................48
Table 2.12 Indirect Costs.......................................................................................48
Table 2.13 Fixed Capital Cost................................................................................49
Table 2.14 Fixed Capital Cost Calculation............................................................50
Table 2.15 Cost of Raw Materials Operational Cost.............................................52
Table 2.16 Direct Labor Cost.................................................................................53
Table 2.17 Indirect Labor Cost..............................................................................54
Table 2.18 Price for Electricity Based on Tariff Group.........................................55
Table 2.19 Total Electricity Cost for Main Equipments........................................56
Table 2.20 Total Electricity Cost for Supporting Equipments...............................57
Table 2.21 Total Cost for Water per Year...............................................................58
Table 2.22 Total Maintenance Cost per Year.........................................................59
Table 2.23 Total Cost for Patent.............................................................................59
Table 2.24 Total Cost for Copyright......................................................................60
Table 2.25 Total Cost for Industrial Design...........................................................60
Table 2.26 Total Cost for Brand.............................................................................61
Table 2.27 Summary of Patent and Brand Registration Cost................................61
Table 2.28 Total Depreciation for Main Equipment..............................................63
Table 2.29 Total Depreciation for Supporting Equipment.....................................64
Table 2.30 Total Depreciation for Building...........................................................66
Table 2.31 Total Depreciation Cost for 10 Years Life Expectancy........................67
Table 2.32 Cost for Building Tax...........................................................................67
Table 2.33 Cost for Salary Tax...............................................................................69
Table 2.33 Cost for Salary Tax (continued)...........................................................70
Table 2.34 Total Cost for Insurance.......................................................................71
Table 2.35 Total Communication Cost...................................................................71
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Table 2.36 Total Distribution Cost.........................................................................72
Table 2.37 Total Cost for Printed Media................................................................73
Table 2.38 Total Cost for Web Adress....................................................................73
Table 2.39 Total Cost for Website..........................................................................73
Table 2.40 Cash Flow of Capital Loan..................................................................74
Table 2.41 Minimum Price of Product Calculation...............................................75
Table 2.42 Cash Flow (prices are in million rupiah).............................................77
Table 2.43 WACC Calculation Parameter..............................................................79
Table 2.44 Cost Breakdown Data..........................................................................80
Table 3.1 Payback Period Calculation...................................................................83
Table 3.2 Breakeven Point Calculation..................................................................85
Table 3.3 Selling Price Fluctuations......................................................................87
Table 3.4 Raw Materials Price Fluctuations..........................................................87
Table 3.5 Operating Labor Wage Fluctuations......................................................88

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CHAPTER 1
SUPPLY CHAIN

1.1 Supply Chain Management


Supply chain management is critical to business success and essential to
reach customer satisfaction. It is the system which is used to get the product to
end customers, from obtaining raw materials to delivering the final product. There
are various reasons to show that supply chain management is one of the most
important part of most business, such as it will boost customer service by assuring
the products are available and easy to access, reduce operating cost, and improve
financial position by increasing cash flow of company. Other benefits include
reduced inventory costs, better information sharing between partners, improved
process integration, and improved quality.
To achieve the most efficient supply chain, there are several parts of
supply chain management that should be identified and managed well, including
supply chain strategy and network design, supply chain service performance,
supply chain costs, supplier performance, and also inventory management. The
success of each business is inextricably linked to the supply chain strategy and the
design of the supply chain itself, especially the part which deals with outbound
distribution from plants or warehouses with some networks evolve. In designing a
supply chain management network, companies need to focus intensely on the service
requirements and profitability of the customer segments that have been identified.
The segmented customer has been identified in the previous chapter based on the
application for people who have problem with their smelly shoes around the range
of age between 17-25 years, people with middle to high income level, and also be
considered based on the location with high relative humidity which is Jabodetabek.
The next point that has to be managed is supply chain service performance.
It has an important role to play in moving goods more quickly to the destination in
order to boost customer satisfaction. Supply chain cost is also important to be
managed to meet customer service goals at the most affordable rate. In this case,
the company require supply chain to deliver materials to assembly plants to ensure
proper material supply at all times as further reduces production cost. Hereafter, it

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is also essential to work in collaboration, at least with primary suppliers with high
performance to try and minimize supply chain uncertainty. By working closely
with the key suppliers, it will reduce the overall cost of owning materials and services
including transportation. The last but not least, as the company is providing products,
the need to manage inventory efficiently is paramount.
From the explanation above, the important factors can be simplified to
some steps of supply chain management. Those steps are listed below.
 Planning
In this stage, company will plan the all of processes that take part in the
plant, starting from the raw material supply until the final product distribution and
is also used to monitor the flow of supply chain; whether it is profitable or not.
 Production
Production process must have good management and scheduling in order
to achieve targeted capacity of product. Running the manufacturing process on
time is vital, because it can prevent disturbance of the final distribution.
 Distribution
Distribution 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.
1.2 Plant Location
Location of plant is important to be considered. The reasons are to
minimize distribution cost and to maximize effectiveness of the operation.
Strategic location will minimize distribution cost so need some locational
analysis. The factors that are considered in selecting plant location are:
a. Environmental condition (climate)
b. Logistic of raw materials to the plant and the product to the market, which
includes time and transportation cost.
c. Access to the market.
d. Infrastructure facilities such as roads, accessibility to railway station,
airport or harbour which gives the most affordable costs. Resources such
as electricity, water, public utilities, civil amenities and means of
communication are important to ensure the plant runs smoothly.

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e. Safety and security of the selected location


f. Government influence. A place which is near governmental will gives best
access to take care legal affairs such as tax relief, subsidies and
liberization. But, it is very difficult to build a plant there because there are
some restrictions for setting up industries in urban areas for pollution
control and decentralization.
After considering those factors, PT. Adi Samavin plant location will be
located on Jl. Ciffest, Cikupa, Tangerang, Banten 15710 (coordinates: -6.232244,
106.519857) with the facilities of electrical, water, human resources and road
access.

Figure 1.1 The Plant Location of ShoeCozy (PT. Adi Samavin)


(Source: Google Maps)
The advantages of choosing this location are as follows.
a. Flood-free area
b. Close to Tol Bitung Bawah, Tangerang (8.7 km away)
c. Close to Tangerang City
d. Located near the industrial area
e. Truck access
f. Letter proprietary

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1.3 Raw Material


To create shoes’ smell remover product, every ingredient used has its own
function and role. Basically, the formulation of this product consists to remove the
microbial particle (with ethanol) and reduce sweat (with nano particle), give
cooling sensation (with peppermint oil), give fragrance (with citrus acid), and
moist the skin of foot (with glycerin). Ethanol also use to be a solvent of the
mixture. Besides that, to create the product this company also use several
materials to be additional ingredients, such as stabilizer (with organoalkoxylene)
and propellant (with hydrocarbon aerosol propellant). The shoes’ smell remover
product also uses plastic seal to package the product.
1.3.1 Raw Material Supply
Distribution of raw materials is core of manufacturing process, PT. Adi
Samavin should ensure the raw materials are always available for the plant in
order to achieve continuous production activity. From the plant location above, it
should be determined which supplier will be finally chosen to proceed with.
In this section, PT.Adi Samavin should have at least two alternatives of the
material’s supplier and then get to choose the key supplier based on some
considerations from the comparison of both quality, price, distance between the plant
and supplier location, amount of raw materials that could be delivered for the
specified time, and duration of raw materials arrival. The alternatives of suppliers
and its comparison could be seen in Table 1.1 and Table 1.2.

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Table 1.1 Comparison of Raw Material Supplier

Needed Amount (kg) 1st supplier 2nd supplier


Component Price per month Price per
Day Week Month Supplier Location Supplier Location
(Rp) month (Rp)

Nano Silver 0.0025 0.0125 0.05 PT. Tarifa Indonesia Bandung 22,809,600 NSMTM Malaysia 14,784,000

Peppermint Pavettia Essential SMGL Aroma


0.8 4 16 Purwakarta 15,738,620 India 23,936,000
Oil Oil Therapy LTD
Orange Oil SMGL Aroma
1.63 8.15 32.6 Nusaroma Depok 19,430,400 India 15,769,600
Essential Oil Therapy LTD
Hydrocarbon PT.Sadikun
North
Aerosol 0.18 0.9 3.6 PT. Betjik Djojo Solo 101,376 Niagamas 104,333
Jakarta
Propellant Raya
Hangzhou
Organo Jessica
0.41 2.05 8.2 Sigma-Aldrinc Singapore 69,273,600 China 6,234,624
Alcoxy Silane Chemiclas Co,
Ltd.
CV.Arumdaeum PT. Dua Kuda
Glycerin 1.21 6.05 24.2 Tangerang 398,661 Jakarta 1,013,760
Kimia Indonesia

PT. Graha Jaya West


Ethanol 12.17 60.85 243.4 Javas Aroma Chem Solo 20,697,600 11,193,600
Pratama Jakarta

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Table 1.2 Comparison of Packaging Raw Material Supplier

Needed Amount 1st supplier 2nd supplier


Component Price per month Price per
Day Week Month Supplier Location Supplier Location
(Rp) month (Rp)

0.1 PT. JMP CV. Anugerah


Plastic Seal 0.5 roll 2 rolls Tangerang 138,000 Jakarta 300,000
roll Indonesia Makmur

PT. Multi
Tin-Coated 500 2500 10000
PT. Aneka Jaya East Java 37,500,000 Makmur Indah Tangerang 30,914,400
Steel Can cans cans cans
Industry
Packaging 25 125 500 Tangerangkardus.
Tangerang 5,761,320 Laris Jaya Indo Semarang 6,125,000
Box boxes boxes boxes com

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Based on those consideration, Nano Silver as the main component of


ShoeCozy will be supplied by PT. Tarifa Indonesia distributor for EVNANO. This
company is located in Giri Mekar, Cilengkrang, Bandung which is still reachable
and not too far from the plant site, so the transportation of material will not
become a big problem. The price of nano silver from PT. Tarifa Indonesia is 32.4
USD per gram, which is more expensive than the nanosilver offered from NSM TM
with 21 USD per gram. Nevertheless, NSM TM as the supplier has some deficiency
if it is compared to PT.Tarifa Indonesia, such as the nanosilver diameter is smaller
and the supplier location in Malaysia will have an impact of more duration of raw
materials arrival. After considering those aspects, PT. Adi Samavin chose
PT.Tarifa Indonesia as the key supplier for nano silver material.
For peppermint oil, Pavettia Essential Oil is the chosen distributor that
based in Purwakarta. Pavettia Essential Oil will be the primary supplier rather
than SMGL Aroma Therapy LTD which based in India. The peppermint oil is
supplied in a bottle with capacity of 1000 mL for one day production and PT.Adi
Samavin decide to buy 5 bottle every ordering which corresponds with one week
production.
To supply sweet orange essential oil as the fragrance of ShoeCozy, the
company has a distributor from Nusaroma in Depok. This supplier is chosen after
being compared with SMGL Aroma Therapy LTD in India based on the distance
between supplier and plant site. This essential oil will be supplied in storage drum
with a capacity of 20 L to provide 1 week of production.
The PT. Adi Samavin has a supplier that sell Hydrocarbon Aerosol
Propellant material, which is PT. Sadikun Niagamas Raya from North Jakarta.
This supplier has advantages when compared to PT. Betjik Djojo that needs a long
duration to transport the product from East Java to the plant site. HAP
(Hydrocarbon Aerosol Propellant) is supplied in a cylinder with weight capacity
of 12 kg which available for 3 months production.
For the stabilizer organo alcoxy silane, PT.Adi Samavin has to supply the
material from China with the supplier name is Hangzhou Jessica Chemicals Co.
Ltd. Therefore, the company need to import the product and will cause higher

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price, so it is more preferable to import this material in big quantities in order to


decrease transport expense of material (import will be once in 3 months).
Glycerin as the moisturizer will be supplied from CV. Arumdaeun Kimia
from Tangerang, Banten. Considering the distance with supplier is quite close,
these raw materials will be supplied once a week in storage drum with a capacity
of 10 L to decrease spaces needed for storing and increasing cash flow.
Ethanol as anti-microbial agent and as a solvent, will be ordered from PT.
Graha Jaya Pratama Kinerja in West Jakarta. Considering the distance aspect, this
supplier has advantages if compared with Javas Aroma Chem from Solo. Ethanol
will be supplied in storage drum with a capacity of 200 L to provide 2 weeks of
production.
For the packaging, plastic seal will be supplied from PT. JMP Indonesia
from Tangerang, the tin coated steel can from PT. Multi Makmur Indah Industry
in Tangerang, and the box is supplied from Tangerangkardus.com which it can be
printed the logo of the product outside the box.
Those supplier provide delivery service and cooperating with TIKI,
DAKOTA, PT.Mex Berlian Dirgantara, Herona Express, JNE, Pos Indonesia
which ensure the supply chain from the chosen supplier to PT. Adi Smavin always
available. Therefore, the supplier that has been chosen as economically and
technically best in PT.Adi Samavin manufacturing process can be seen in Table 1.3.

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Table 1.3 Chosen Raw Materials Supplier

Chosen Suppliers
Raw
Amount per Unit Delivery Cost
Materials Supplier Location
order Capacity (Rp)/Order
PT. Tarifa
Nano Silver Bandung 0.05 kg 30,000
Indonesia

Pavettia
Peppermint Oil Purwakarta 4 kg 40,000
Essential Oil
Orange Oil
Nusaroma Depok 8.15 kg 25,000
Essential Oil
Hydrocarbon
PT.Sadikun North
Aerosol 12 kg 28,750
Niagamas Raya Jakarta
Propellant
Hangzhou
Organo Alcoxy Jessica
China 24.6 kg 4,630,208
Silane Chemiclas Co,
Ltd.
CV.Arumdaeum
Glycerin Tangerang 6.05 kg 25,000
Kimia

PT. Graha Jaya West


Ethanol 121.7 kg 190,000
Pratama Jakarta

PT. JMP
Plastic Seal Tangerang 1 roll 25,000
Indonesia

PT. Multi
Tin-Coated
Makmur Indah Tangerang 5000 can 25,000
Steel Can
Industry

Tangerangkardus
Packaging Box Tangerang 250 Box 25,000
.com

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1.3.2 Order Capacity


Order capacity and schedule is determined based on the amount needed for
the manufacturing process, supplier maximum amount of materials that can be
supplied for each delivery time, distance between supplier and our plant location,
time needed until the materials arrived in the plant site. Considering most of the
supplier from Indonesia and located in Bandung, Jakarta, and Tangerang, the
supply of materials will be carried by land transportation. The materials used are
chemical with good resistance and not easily damage, so it will be supplied from
once a week to once a month, except for materials that will be imported from
China will be supplied four time in a year.
The time needed to deliver the raw material to the plant is assumed has no
problem on the trip. To anticipate if there is delay in delivery of raw material,
PT.Adi Samavin order raw material with the safety inventory in the first order.
The first order is needed to stock the material 10% for the reserve at the
beginning. Regular order is just the usual calculation of material that is needed
without 10% excess. The amount of materials bought per order is listed in Table
1.4. and schedule for material order is listed in Table 1.5.

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Table 1.4 Amount of Material per Order
Order Delivery cost
Price per Price per
Regular Order (kg) First Order (kg) frequency per order
Supplier order (Rp) month (Rp)
Ingredient Location (a month) (Rp)
Company
Week Month Week Month

PT. Tarifa
Nano Silver Bandung 0.0125 0.05 0.01375 0.055 22,809,600 1 22,809,600 30,000
Indonesia
Peppermint Pavettia Essential
Purwakarta 16 4.4 17.6 3,934,655 4 15,738,620 40,000
Oil Oil 4
Sweet Orange
Nusaroma Depok 8.15 32.6 8.965 35.86 4,857,600 4 19,430,400 25,000
Essential Oil
PT.Sadikun North 1/3 (once in
HAP 0.9 3.6 0.99 3.96 312,999 104,333 28,750
Niagamas Raya Jakarta 3 months)
Organo Hangzhou Jessica 1/3 (once in
China 2.05 8.2 2.255 9.02 6,234,624 2,078,208 4,630,208
alcoxy silane Chemiclas Co, Ltd. 3 months)
CV.Arumdaeum
Glycerin Tangerang 6.05 24.2 6.655 26.62 99,665 4 398,661 25,000
Kimia
PT. Graha Jaya West
Ethanol 60.85 243.4 66.935 267.74 5,596,800 2 11,193,600 190,000
Pratama Jakarta

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Table 1.4 Amount of Material per Order (Continued)
Order Delivery cost
Price per Price per
Regular Order First Order (kg) frequency per order
Supplier order (Rp) month (Rp)
Ingredient Location (a month) (Rp)
Company
Week Month Week Month

Plastic Seal PT. JMP Indonesia Tangerang 0.5 roll 2 roll 69,000 2 138,000 25,000
0.55 roll 2.2 roll
Tin-Coated PT. Multi Makmur 2500 11000
Tangerang 10000 can 15,457,200 2 30,914,400 25,000
Steel Can Indah Industry can 2750 can can
Packaging Tangerangkardus.c 125
Tangerang 500 box 2,880,660 2 5,761,320 25,000
Box om box 137.5 box 550 box

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Table 1.5 Raw Material Supply (1st-6th Month) Scheduling
January February March April May June
Raw Material Schedule
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
Order
Nano Silver
Receive
Order
Peppermint Oil
Receive
Order
HAP
Receive
Sweet Orange Order
Receive
Essential Oil
Order
Organo Alcoxy Silane
Receive
Order
Glycerin
Receive
Order
Ethanol
Receive

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Table 1.5 Raw Material Supply (1st-6th Month) Scheduling (Continued)
January February March April May June
Raw Material Schedule
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
Plastic Seal Order
Receive
Tin-Coated Steel Can
Packaging Box Order
Receive
Plastic Seal
Order
Tin-Coated Steel Can
Receive

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Table 1.5 Raw Material Supply (7th-12th Month) Scheduling (Continued)
July 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 1 2 3 4
Order
Nano Silver
Receive
Order
Peppermint Oil
Receive
Order
HAP
Receive
Sweet Orange Order
Receive
Essential Oil
Order
Organo Alcoxy Silane
Receive
Order
Glycerin
Receive
Order
Ethanol
Receive

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Table 1.5 Raw Material Supply (7th-12th Month) Scheduling (Continued)
January February March April May June
Raw Material Schedule
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
Plastic Seal Order
Receive
Tin-Coated Steel Can
Packaging Box Order
Receive
Plastic Seal
Order
Tin-Coated Steel Can
Receive

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1.4 Inventory
Inventory is important part in the plant, the amount of raw materials
should be predicted and final products stocked in order to determine the capacity
of inventory.
1.4.1 Raw Material Inventory
From the scheduling of raw material supply that has been made in
previous part, PT.Adi Samavin can determine how many raw materials are
available in the inventory at the specified time. The amount of materials available
is presented in form of chart that listed amount of materials in our inventory at the
specified time (Figure 1.2).
Some of the raw materials are supplied in once a week, such as peppermint
oil, sweet orange essential oil, and glycerin. But some have different arrival time,
like nanosilver which will be supplied once a month, ethanol will be supplied
twice a month, for HAP and organo alcoxy silane will be supplied once in three
months. The materials that take a lot of place is ethanol, because it is used as 30%
volume formulation of the product which consume most of the inventory space.
For the first order, PT.Adi Samavin will order the amount of materials in exceed
as the safety inventory.

Object 3

Figure 1.2 Raw Material Inventory for 3 Months Activity

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1.4.2 Product Inventory


Product inventory is needed to save final products that have been produced
before leaving the plant and being distributed to distributor and customers. The
capacity of products’ inventory is influenced by the capacity of final products
produced by the manufacturing process and the time when the products will be
distributed.
Product inventory also needed for the anticipation of fluctuation in the
products’ market demand. The company needs to store products in exceed of
normal demand to cover the increased demand that can be happened at certain
time. Final products will leave the plant and being distributed every once a week,
there will be a keep about 30% of every distribution capacity as the anticipation
for the increased demand. Additional product inventory also can be used to keep
the supply to distributor if there is some disturbances or problems happen in the
manufacturing process. Plot of products amount for the specified time can be seen
in Figure 1.3.

Object 5

Figure 1.3 Products Inventory for One Month Activity


1.5 Product Distribution
After packaging the shoes’ smell remover product to can, the company
will distribute the product to consumer. This product will be packed in packaging
box that will be processed in the stage of distribution to consumers. This phase is
used to explain the time and product delivery process from plant to consumers.

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This is needed to make the process runs smoothly to some distribution locations
include stores, manufacturing site, transportation, and distribution time of
products.
1.5.1 Product Distribution Location
Location of product distribution is determined based on the target area of
marketing. The company target this shoes’ smell remover product will be
distributed to Jabodetabek area (including Jakarta, Bogor, Depok, Tangerang, and
Bekasi) through some supermarket, sports store, and shoes’ cleaner store that can
be easily found in this area. Consumer’s targets are the whole society economic
levels especially people who use shoes for their activities. Selection of target
consumers was conducted because every person can get smelly in their shoes
especially students, employees, athletes, etc.
This product marketing also focused on Jakarta area. This is due to the
capital city of Indonesia that have the largest population in Indonesia. Besides,
Jakarta is the city with a high rate of economic growth and high construction
growth, and also has areas that are central to a regional economy that is very
potential to sell new products to consumers.
This product will be marketed and distributed by the supermarket and
wholesaler to several city in Jabodetabek area depends on the retailer. The
company divided our market to nine regions:
Region I : Jakarta
Region II : Bogor
Region III : Depok

Region IV : Tangerang
Region V : Bekasi

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Table 1.6 Distributors Outlets Based on Regions


Region Wholesaler Location
Lotte Avenue Jl. Prof Dr. Satrio Jakarta
Selatan
Kelapa Gading Mall III Ground Floor
Jakarta Utara
Mall Pacific Place Lt. 2 Kawasan SCBD
Jakarta Selatan
Pasaraya Blok M Kebayoran Baru Jakarta
Selatan
Plaza Senayan Jl. Asia Afrika Jakarta
Planet Sport Pusat
Mall Pondok Indah Lt. II Jakarta Selatan
Region I: Jakarta Puri Indah Mall Lt. Dasar Jakarta Barat
Seibu Grand Indonesia MH Thamrin
Jakarta Pusat
Mall Senayan City Jl. Asia Afrika Jakarta
Pusat
Sogo Emporium Mall Pluit Jakarta Utara
Sogo Mall Kelapa Gading Jakarta Utara
Mall Taman Anggrek Lt 1 Slipi Jakarta
Barat
Jl Jendral Sudirman Jakarta Selatan
Kem Chicks Jl. Kemang raya No. 3 Mampang
Prapatan Jakarta Selatan

Table 1.6 Distributors Outlets Based on Regions (Continued)


Region Wholesaler Location
Region I: Jakarta Sneaklin Pasar Santa lantai 1 AKS 55-56, Jl.
Cipaku 1 Kebayoran Baru
Jl. Taman Surya Bulevar 1 Blok J2 No. 8
Pegadungan, Kalideres

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Mall of Indonesia Jalan Boulevard Barat


Raya Kelapa Gading Jakarta Utara
PIK Aenue Mall Pantai Indah Kapuk
Jakarta Utara
Jl. Mendawai 1, no. 78 A, Blok M,
Kebayoran Baru, Jakarta Selatan
Jl. Tebet Utara Dalam No.13 Jakarta
Selatan
Jl. Bintaro Utama Raya F2/6, Bintaro
Sektor 1, Jakarta Selatan
Jl. Sunan Giri No 5B Rawamangun
Shoes and Care
Jakarta Timur
Gading Nias, Tower Chrysant, Blok GHD
20 Kelapa Gading Jakarta Utara
Jl. Mandara Permai 7, The Metro Blok 6
no. JD-JE, Lantai 3 Jakarta Utara
Jl. Sukarjo Wiryopranoto No. 99A, Sawah
Besar Jakarta Pusat
Jl. Remaja III no 22 Kemayoran Jakarta
Pusat
Cleanvast
Jalan Bendungan Hilir Raya No. 46
Jakarta Pusat

Table 1.6 Distributors Outlets Based on Regions (Continued)


Region Wholesaler Location
Planet Sport Cibinong City Mall Bogor
Jl. Binamarga no. 10 Bogor
Region II: Bogor Sneaklin
Jl. Lodaya II no. 6 Bogor
Cleanvast Jl. Ahmad Yani no 37 Bogor
Margo City, Margonda Raya No. 358
Planet Sport
Depok
Region III: Depok Apartment Taman Melati Margonda kios
Sneaklin
k-8 Depok
Shoes and Care Topskor Kelapa Dua Depok
Region IV: Tangerang Planet Sport Summarecon Mall Serpong GF Unit

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Tangerang
Summarecon Mall Serpong, Lobby
Sneaklin Basement 5

Jalan Mina Raya 1 Blok K4 Tangerang


Cleanvast
Cengkareng Indah Blok FD Tangerang
Planet Sport Jl. Irigasi Tertia 2 Bekasi
Lagoon Avenue Bekasi – Ground Floor
Sneaklin
57 Grand Kamala Lagoon
Region V: Bekasi Grand Galaxi City Jalan Pulo Sirih
Boulevard Blok BD No.121B, Bekasi
Shoes and Care
Barat
Jl. Raya Jatiwaringin no. 10 Bekasi

1.5.2 Proportion of Product Distribution


Production capacity is 500 bottles of ShoeCozy product per day and 25
box packages contain 20 bottles of ShoeCozy product per day. The products will
be distributed once a week to the supermarket distributor’s and to the retailer. PT.
Adi Samavin distribute once a week, so the product will not stay on the store for
too long but will not be out of stock too soon. So, there will be 175 box packages
per week. Those will be divided to some supermarket, sports store, and shoes’
cleaner store.
For the proportion, the company will distribute the products to Planet
Sport for 60% of total production once a week, because Planet Sport is a famous
sports store and also have the biggest number of stores spread on Jabodetabek
area. For Kem Chicks will distribute 12% of total production once a week,
because Kem Chicks is a big supermarket, but doesn’t have as much stores in
Jabodetabek (only 2 stores). For Sneaklin also Shoes and Care, will distribute
12% of total production once a week, because both of stores has much of stores in
Jabodetabek area, but that stores not as famous as Planet Sport, and that store is
only shoes’ cleaner (not selling shoes). For Cleanvast, the company will distribute
4% of total production once a week, because this store does not have bigger
number of stores spread on Jabodetabek area. Amount distribution of every
distributor for each region is based on the number of stores available, the larger
the number of stores, the larger the amount of product distribute.

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Table 1.7 Proportion of Product Distribution


Amount Amount
Wholesaler (packages per Region (packages per 2
week) weeks)
I 78
II 6
Planet Sport 105 III 6
IV 6
V 6
Kem Chicks 21 I 21
I 9
II 3
Sneaklin 21 III 3
IV 3
V 3
Shoes and I 17
21 III 3
Care IV 3
I 4
Cleanvast 7 II 2
IV 2

1.5.3 Product Distribution from Plant to Customer


The product that had been made will be saved in storage for distribution to
consumer. Then, once every week, the product will be distributed to distributor
distribution center. The distributor’s distribution center locations are listed below:

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Table 1.8 Distribution Center Location


Distributor Location
PT. Mitra Adiperkasa Tbk Sahid
Planet Sport Sudirman Center Jl. Jend. Sudirman
Kav 86 Jakarta
Kem Chicks Building Jl. Kemang raya
Kem Chicks No. 3 Mampang Prapatan Jakarta
Selatan
Pasar Santa lantai 1 AKS 55-56, Jl.
Sneaklin
Cipaku 1 Kebayoran Baru
Jl. Mendawai 1, no. 78 A, Blok M,
Shoes and Care
Kebayoran Baru, Jakarta Selatan
Jalan Bendungan Hilir Raya No. 46
Cleanvast
Jakarta Pusat
After distributing the product to the distribution center and the retailer, then
it is up to the distributor’s distribution management to distribute the products to all
their stores located in five regions that mentioned in the last part. Then, the
customers of the products can buy the product from supermarket and retailer
store.
The company choose to distribute product once a week with a pick up car.
PT Adi Samavin will distribute the product to each distributor and retailer store
once a week, with using a truck and we believe we will make the distribution cost
cheaper. The distribution to distributor will go only with one day to all of the
distributors. The product distribution costs are listed below:

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Table 1.9 Product Distribution Cost

Solar Total Cost per


Distance Total Cost per
Route Pathway Frequency Consumption Week
Year (Rp)
(km) (L) (Rp)
Kem Chicks Distribution Service to Planet Once a
Land 7.6 1.5 7725 401700
Sport Distribution Service week
Sneaklin Distribution Service to Kem Chicks Once a
Land 3.5 0.6 3090 160680
Distribution Service week
Shoes and Care Distribution Service to Once a
Land 2.9 0.5 2575 133900
Sneaklin Distribution Service week
Once a
Plant to Shoes and Care Distribution Service Land 39 7 36050 1874600
week
Planet Sport Distribution Service to Cleanvast Once a
Land 3.5 0.6 3090 160680
Distribution Service week
Once a
Back to Plant Land 39 7 36050 1874600
week
Toll Fee 33000 1716000
Rent a Pick Up Car 500000 26000000
TOTAL DISTRIBUTION COST 32322160

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1.5.4 Mode of Transportation


For the distribution using land route, we decide to use the pick-up car
because the effectiveness and the flexibility to location target. By using pick-up
car, Shoecozy product will be sent to distribution center and to retailer store such
as shoes store and shoes’ cleaner store. After that, the product will be distributed
in five regions mentioned in the second part. The car will be rent by the company
to save the investment cost.

Figure 1.4 Transportation Route

1.6 Product Marketing


Marketing strategies is one of the most essential things which help the
company compete with the other brands. Decent marketing strategies need to be
taken be fully prepared so its can reach consumers prospective. ShoeCozy
marketing strategies is divided into 3 ways such as through printed media,
advertisement on web addresses and lastly is the company’s own website.
Explained below the markerting strategies of ShoeCozy product:
a. Printed Media
Firstly, the strategy of the company is to post our advertisement on Hai
Magazine every 3 months. The company also plan to have own brochure that can
be distributed to people coming to shoes cleaner store and sneakers events also
any other public places. The brochure will be printed every 2 months in full colour
and attractive display, in hope that people would be conviced to buy the product.
Lastly, the company would also print out booklets every 4 months which contain
more detail information about the product, including the components,

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composition, the special performance that have a great effect, etc. The booklets
are intended to be distributed to our prospective clients/distributors.
b. Web Address
Since social media and the other online platforms have been growing
rapidly lately, the company hope to fully maximize those online facilities so
people from the another cities and neighboring countries would also be able to be
familiar with our product. Some of the platforms that we use are free of charge,
including linked in, google adsense, Instagram, Facebook and Twitter. Another
web address that is free is iklan-gratis.com. Each day, the advertisement will be
shown 30 times for the whole year.
c. Website
The company believe that company’s personal website will be the most
reliable platform for consumers to know more about ShoeCozy product. Besides
that the company have the authority to put whatever we like on the website, also
get in touch directly with consumers who have questions. This website can also
attract thw clients and distributors to keep working as our supporting companies.

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CHAPTER 2
PRODUCT COSTING

PT. Adi Samavin is an industrial manufacturing plant that focused on


production of shoes smell remover product. The product will be manufactured in
Cikupa, Tangerang Industrial area, which is quite close to the raw material and
customer location. The market capacity based on calculation before is about 500
cans per day. The quantity will be obtained by one cycle batches of process with 8
hours from 8:00 AM to 15:00 PM every day and total 250 working days a year.
By this intention, the company need to do an economic analysis, so the intention
of this product manufacturing process can be achieved.
An accurate economic analysis is needed to be done to determine whether
the product manufacture will be profitable or not. In this analysis, all costs
involved in all phases of this product manufacture are calculated considerably to
determine product’s cost. The applied tax and prediction profit also includes to
determine the selling price from product.
All of the costs involved in this calculation are divided into two different
components. The two main cost components here are fixed cost and variable cost.
Fixed cost is cost that are not influenced by the amount of production and tend to
keep each year, such as marketing expenses (advertising and promotion),
administrative costs, indirect employee salaries (indirect labor), as well as other
costs that affect the price of the product (insurance, taxes, depreciation).
Meanwhile, the variable cost is the cost that will change depends on the amount of
production or needs, such as the cost of purchasing materials or raw materials and
employee salaries (direct labor).
There are some assumptions which have been made so that the product
evaluation can be done easier.
 The production plant will be built in 2018 for one year and operates in
the beginning of 2019
 Currency conversion 1 US$ = Rp 14,150 (by May 2018).
 Some equipments or building have salvage value.

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 Depreciation will be calculated by Declining Balance Method with


10% as the value of f factor.
 Plant is built in empty land located in Cikupa, Tangerang.
 Plant is assumed to operate for 10 years.
 There are 250 working days with one batch process a day from 08:00
to 15:00.
2.1 Total Capital Investment
An investment is needed as the capital cost to begin a product
manufacture. Total Capital Investment (TCI) of a chemical plant includes
purchase of the land, building, offsite, supporting facilities, utilities
installation, market research, licensing, and contractor’s fee. Investment
cost is divide into 2 categories, there are 2 Fixed Capital Cost (F c) and
Working Capital (Wc). Fixed Capital Cost is the capital needed to supply
the necessary manufacturing and plant facilities. While Working Capital
Cost is the capital needed to operate of the plant until company get
income.
Capital Investment (TCI) is calculated with the combined method,
Guthrie for Total Permanent Investment (TPI) calculations and general
translation for other expenses. Guthrie method is chosen because it can
calculate other cost besides equipment cost based on bare modul factor.
This factor already include cost for additional fee such as delivery fee and
installation fee. Guthrie method is done by calculating the Total Bare
Module Cost. Total Bare Module Cost is the total cost of equipment with
the additional delivery fee, customs fee, and other required fee. The
purpose of this TCI calculation is to know whether the factory
development will give preferable profits or not.
The equation to calculate Total Capital Investment:
TCI=¿Capital ( FC )+ Working Capital(WC ) (2.1)
where:
¿ Capital Cost=1,18 x Total Permanent Investment Cost (CTPI )

CTPI =[C Equipment +C site∧building +C supporting facilities +C others ]

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2.1.1 Fixed Capital


Fixed capital is all cost that is needed to build the plant, office, and its
supporting equipment. Fixed capital consists of direct cost and indirect cost.
2.1.1.1 Direct Cost
Direct cost is expenses that directly connected to the production process
including equipment cost, land cost, building cost, offsite facilities,supporting
facilities investment cost, utilities installation cost, market research cost, and
licensing cost.
A. Equipment Cost
In this section, all costs that are used to buy main equipments for
the plant process production will be discussed. Equipment cost here is
calculated with Guthrie method by adding some cost that known as “Bare
Module Cost.”
The sequence step to obtain Total Bare Module Cost is:
1. List all of the equipment needed, include the quantity
2. Classify it in a category that is most suitable in data to obtain bare-module
factor (Figure 2.1)
3. Look for Marshall and Swift Chemical Equipment Cost Index to determine
cost of equipment in year which will be able to buy those equipment

4. Use the formula to obtain Total Bare Module Cost. The formula is:
Total Bare Module Cost =Quantity x FOB Price x Bare Module Factor (2.2)

From the previous assignment, the equipment that are used in PT.
Adi Samavin have been listed with the quantity information. In this
section, those equipment will be devided into certain category to obtain
bare module factor. The bare module factors included FOB (Free on
Board) purchase, equipment instruments and installations (piping,
concrete, steel, controllers, electrical, insulation, and paint), direct labor
for installation (material erection and equipment setting), also indirect
module expenses (insurance, taxes, construction overhead, and contractor
engineering expenses). Then, this factor will be multiplied by the cost of
each equipment. As for the equipment that have no bare module factor in
the table, it would use the average value of the all bare module factor.

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In this table, the bare module factor for each equipment used from
literature can be seen below.

Figure 2.1 Bare Module Cost

(Source: Chemical Engineering Handbook 8th Edition (Perry, 2006))

A cost index is used to project a cost from a base year to another


selected year. Table 2.1 shows the Marshall and Swift chemical equipment
cost index.

Table 2.1 Marshall and Swift Chemical Equipment Cost Index

Year Cost Index


2005 1,244.50
2006 1,302.30
2007 1,373.30
2008 1,449.30
2009 1,468.60
2010 1,457.40
2011 1,565.64
1,618.88
2012

2013 1,672.12
(Source: Chemical Engineering Handbook 8th Edition (Perry, 2006))

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Based on this annual index of chemical equipment price change per


year, it will be extrapolated up to the year of 2018. The trend of line
equation will be calculated from the table above. By using the trend line of
annual index in which y= 53,39x – 105805. The extrapolation price
calculation is shown in Table 2.2.

Table 2.2 Forecasting Marshall and Swift’s Chemical Equipment Cost Index

Year Cost Index

2014 1,725.27
2015 1,778.66
2016 1,832.05
2017 1,885.44
2018 1,938.83
(Source: Marshall and Swift, 2013)
Based on Perry Chemical Engineering Handbook (8th edition), the
following equation is used to determine the price for year 2019:

Future Cost ( 2019 )=Original Cost ( 2018 ) [ IndexValue(2018)


IndexValue(2017) ]
(2.3)
Future Cost ( 2019 )=Original Cost ( 2018 )
[ 1938.83
1885.44 ]
Here is the table of Total Bare Module Cost:

Table 2.3 Bare Modul1e Cost

FOB
FOB in FOB in Quant Total Bare
Equipme in BM
2018 2019 ity Modul Cost
nt 2018 F
(Rp) (Rp) (Unit) (Rp)
(USD)
Mixer 750.0 10,537,500. 10,835,89 17,445,794.1
1 1.61
H30 0 00 6.96 0
Filling 5,000. 70,250,000. 72,239,31 1 1.61 116,305,294.
Machine 00 00 3.05 01

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CJXH-
800 C
Packaging 3,074. 43,189,700. 44,412,72 71,504,494.7
1 1.61
Machine 00 00 9.66 6
205,255,582.
Total Equipment Cost
87

B. Land Cost
Land is often acquired by a company some time prior to the building of a
manufacturing facility. When a project is committed to be built on this land, the
value of the land becomes part of that facility’s capital investment. PT. Adi
Samavin considers to build the plant at Cikupa, Tangerang. The available space is
around 240 m2 with the land price reaches the amount of 3,000,000 IDR (217.76
USD) per square metric or around 720,000,000 IDR (around 52,200 USD)
(rumahdijual.com, Accessed April 5th, 2018).

Table 2.4 Land Cost

Price per m2 (Rp) Area (m2) Land Cost (Rp)


3,000,000 240 720,000,000
(Source: Gathered from several references)
C. Building Cost
Building Cost is cost to build plant and office as well. But the
office is located inside the plant, so if PT Adi Samavin constructs the
plant, the office will be built too. The data of building cost is taken by
contractor in Tangerang, Banten.

Table 2.5 Building Cost

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


Building Area (per m2) 3,000,000 200 600,000,000
Foundation 10% from land cost - 72,000,000
Land Development 5% from land cost - 36,000,000
TOTAL BUILDING COST 708,000,000
(Source: Gathered from several references)
D. Supporting Facilities Investment Cost

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A plant and its operation office must provide a decent facility for
its worker so that they can work optimally and accelerate production
process. The amount of these supporting equipments are determined from
the number of employees and their needs. This includes all sorts of
facilities that essential to an office, enhance the comfort of their work
hours and also the facilities that maintain their health, plus any other types
of facilities that PT Adi Samavin feels necessary to be in this plant and
site. Here is the detail of supporting facilities investment cost.

Table 2.6 Supporting Facilities Investment Cost

No Supporting Equipments Quantity Price (Rp) Total Price (Rp)


1 Sofa 1 2,000,000 2,000,000
2 Computer (Asus) 3 4,200,000 12,600,000
3 Receptionist Desk 1 1,000,000 1,000,000
4 Air Conditioner 2 3,500,000 7,000,000
5 Dispenser 2 300,000 600,000
6 Printer & Fotocopy Machine 1 10,000,000 10,000,000
7 Office Desk 2 1,000,000 2,000,000
8 Office Chairs 5 250,000 750,000
9 Genset 1 200,000,000 200,000,000
10 Locker 1 400,000 400,000
11 Meeting Desk and Chair Set 1 6,000,000 6,000,000
12 Cupboards 2 1,200,000 2,400,000
13 Whiteboard 1 300,000 300,000
15 Telephone 1 500,000 500,000
16 Recycle Bin 6 50,000 300,000
17 Toilet Set 2 4,000,000 8,000,000
18 Fire Extinguisher 4 kg 3 402,000 1,206,000
19 First Aid Medicine 1 200,000 200,000
20 Carpet for Praying Room 3 350,000 1,050,000
1 set (6
21 CCTV 8,000,000 8,000,000
CCTVs)
22 Long Neon Lamp 10 75,000 750,000
23 Internet Router 1 300,000 300,000
24 Projector Set 1 1,300,000 1,300,000
25 Fax Machine 1 1,500,000 1,500,000
Total Utilities Cost 268,156,000
(Source: Gathered from several references)
E. Utilities Installation Cost

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Utilities Installation Cost is cost to provide utilities for plant and


office. Utilities needed for plant is water and electricity while utilities for
office include water, electricity, telephone, internet, and hydrants. Here is
the detailed about utilities installation cost.
Table 2.7 Utilities Installation Cost

Installation Note Cost (Rp)


PLN Cost in January 2018 for 6800
Electricity Installation 1,614,000
vA-200kvA
PDAM - Industri Kecil Golongan
Water Installation 1.166.500
IVB
Network and Telephone Indihome 2018 Business
Free
Installation Subscription
Total Utilities Installation Cost 2,780,500
(Source: Gathered from several references)
F. Market Research Cost
Market Research is needed to know market situation when PT Adi
Samavin are going to sell the shoes’ smell remover product. In the
application, market research could be done by conducting a survey,
questionnaire distribution, or hire a consultant service to analyze the
market. This analysis and evaluations from the consumer can help to
improve our product convenience. The table below shows the detailed cost
of market research.

Table 2.8 Market Research Cost

Market Research Activities Price (Rp)


Surveying 2,500,000
Consultant Service 7,500,000
Total 10,000,000
(Source: Gathered from several references)
G. Licensing Cost
Cost of patent registration and maintenance are regulated in
Peraturan Pemerintah No. 45 tahun 2016. According to the law, the costs
that are charged to PT Adi Samvin in producing ShoeCozy products are
shown below.

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Table 2.9 Patent Fee Details

No Non-Tax Revenue Unit Cost (Rp) Qty. Total (Rp)


.
1 Patent request Per request 1,250,000 1 1,250,000
2 Additional cost per Per request
50,000 16 800,000
claim
3 Request for letter of Per request
250,000 1 250,000
priority right evidence
4 Substantive inspection Per request 2,000,000 1 2,000,000
5 Cost for publishing Per
250,000 1 250,000
certificates certificate
6 Admission for liceso Per request
thense agreement 1,000,000 1 1,000,000
registration
7 Request for compulsory Per request
3,000,000 1 3,000,000
licensing
8 Request for general list Per request 18,000,00
300,000 60
excerpts of patents 0
9 Request for copies of Per sheet
10,000 60 600,000
patent documents
TOTAL PATENT COST 27,150,00
0
(Source: Peraturan Pemerintah No. 45 tahun 2016)
Then, the table below shows brand fee cost details which is also based on
Peraturan Pemerintah No. 45 Tahun 2016.

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Table 2.10 Brand Fee Details

No. Non-Tax Revenue Unit Cost (Rp) Qty. Total (Rp)


1 Request for trademark Per 1,800,000 1 1,800,000
registration request
2 Brand license publishing Per 150,000 1 150,000
costs certificate
3 License agreement Per 500,000 1 500,000
registration request
4 Request for official excerpt and written statement about the brand
a. Official excerpt Per 200,000 1 200,000
request for brand request
registration
b. Request for written Per 200,000 1 200,000
statement about the request
similarity of a brand with
the registered brand
c. Request for written Per 200,000 1 200,000
statement about the request
similarity of a brand with
the registered brand
5 Cost for proof of priority Per 300,000 1 300,000
trademark application request
copy
6 Registration of intellectual Individual 0 1 0
property rights
TOTAL BRAND FEE COST 3,350,000
(Source: Peraturan Pemerintah No. 45 Tahun 2016)
The summary of patent and brand fee calculation is shown in table
below.

Table 2.11 Licensing Cost

Type of Fee Cost (Rp)

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Patent Registration 17,000,000


Brand 7,050,000
TOTAL LICENSING COST 24,050,000
(Source: Peraturan Pemerintah No. 45 Tahun 2016)

2.1.1.2 Indirect Cost


Indirect Cost is the cost that is not directly involved with the
production process. Things that were categorized as indirect costs are
based on the total building cost, which are: Engineering and supervision
cost (4%), construction expenses (4%), contractor’s fees (3%), and
contingency (5%). The calculation is done as shown in equation below:

Table 2.12 Indirect Costs

Total Building Cost


Component Percentage Total Cost
(Rp)
Engineering and
4% 28,320,000.00
Supervision Cost
Construction Expenses 4% 708,000,000 28,320,000.00
Contractor’s fees 3% 21,240,000.00
Contingency 5% 35,400,000.00
Total 113,280,000,00
(Source: Gathered from several references)
Then, calculated all of the fixed capital cost and the result is shown below.

Table 2.13 Fixed Capital Cost

Type of Fixed Sub Type of Cost for Each Sub Cost Accumulation of Each
Capital Fixed Capital Fixed Capital (Rp) Type of Fixed Capital (Rp)
Direct Cost Total BM Cost 205,255,582.87 1,971,572,154
Land Cost 720,000,000
Building Cost 708,000,000
Supporting
268,156,000
Facilities Cost
Utilities Cost 29,660,571

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Market
10,000,000
Research Cost
Licensing Cost 30,500,000
Contractor +
Indirect Cost 113,280,000.00 113,280,000.00
supervision
Total Fixed Capital Investment Cost 2,084,852,154
(Source: Gathered from several references)

2.1.1.3 Working Capital Investment


Working capital is the fee paid in the first months of the production
process before the company earns revenue from product sales. The
working capital for a chemical plant consists of the total amount of money
invested in raw materials and supplies carried in stock, accounts
receivable, cash kept on hand for monthly payment of operating expenses,
such as salaries, and taxes payable. Cost of working capital (FW) can be
estimated by the formula as in the following equation.
Working Capital Cost =5 x ¿Capital Cost (2.4)
WorkingCapital Cost =5 x 2,084,852,154
W o rking Capital Cost=104,242,608
2.1.2 Total Capital Investment
After determining the working capital, the total capital investment can be
calculated from the equation below.
C TCI=1, 18 ( C TBM +C site +C buildings +Coffsite facilities ) +C WC
(2.5)
The calculation of total capital investment cost and total fixed capital
cost.are shown in Table 2.14.
Table 2.14 Fixed Capital Cost Calculation

Cost
Cost for Each Accumulation of
Type of Fixed Sub Type of
Sub Fixed Each Type of
Capital Fixed Capital
Capital (Rp) Fixed Capital
(Rp)
Direct Cost Total BM Cost 205,255,582.87 1,971,572,154
Land Cost 720,000,000
Building Cost 708,000,000
Supporting
268,156,000
Facilities Cost
Utilities Cost 29,660,571

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Market Research
10,000,000
Cost
Licensing Cost 30,500,000
Contractor +
Indirect Cost 113,280,000.00 113,280,000.00
supervision
TOTAL FIXED CAPITAL INVESTMENT COST 2,084,852,154
TOTAL WORKING CAPITAL INVESMENT 104,242,608
TOTAL CAPITAL INVESMENT 2,564,368,149

The cost of total capital investment is Rp 2,564,368,149. 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. Based on the
cost breakdown above, the costs that give the biggest contribution is land
and building cost (34.53% for each).

Object 26

Figure 2.2 Percentage of Fixed Capital

2.2 Operational Cost


Operational cost is defined as the expenses needed for the plant to operate
and distribute product whereas operational cost includes the manufacturing cost
and general expenses.
2.2.1 Manufacturing Cost
Manufacturing costs are the sum of all expenses needed for production
process of the product. The costs consist of raw material cost, utilities cost, direct

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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 Direct Production Cost
A. Raw Material
Raw material costs are the sum of all cost needed to buy all raw material to
produce the product, ShoeCozy. The raw materials of ShoeCozy are nano-silver,
peppermint oil, sweet orange essential oil, glycerine, ethanol, organo alcoxy silane
and HAP proppellant. Besides, it would be needed to consider the cost of the
packaging which are the bottles, sealers and packaging boxes.

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Table 2.15 Cost of Raw Materials Operational Cost

Total
Order/YearOrder Price per Total Order Delivery
Raw Delivery
Supplier Location Frequency Order Cost per Cost per
Materials Cost per
Amount Unit per Year (Rp) Year (Rp) Order (Rp)
Year (Rp)
Nano Silver PT. Tarifa Indonesia Bandung 0.625 kg 12 22,809,600 273,715,200 30,000 360,000
Peppermint
Pavettia Essential Oil Purwakarta 200 kg 48 3,934,655 188,863,440 40,000 1,920,000
Oil
Orange Oil
Nusaroma Depok 407.5 kg 48 4,857,600 233,164,800 25,000 1,200,000
Essential Oil
Hydrocarbon
PT.Sadikun Niagamas North
Aerosol 45 kg 4 312,999 1,251,996 28,750 115,000
Raya Jakarta
Propellant
Organo Hangzhou Jessica
China 102.5 kg 4 6,234,624 24,938,496 4,630,208 18,520,832
Alcoxy Silane Chemcals Co, Ltd.
CV.Arumdaeum
Glycerin Tangerang 302.5 kg 48 99,665 4783,920 25,000 1,200,000
Kimia
PT. Graha Jaya West
Ethanol 3042.5 kg 24 5,596,800 134,323,200 190,000 4,560,000
Pratama Jakarta
Plastic Seal PT. JMP Indonesia Tangerang 25 roll 24 69,000 1,656,000 25,000 600,000
Tin-Coated PT. Multi Makmur
Tangerang 125000 can 24 15,457,200 370,972,800 25,000 600,000
Steel Can Indah Industry
Packaging
Tangerangkardus.com Tangerang 6250 box 24 2,880,660 69,135,840 25,000 600,000
Box
TOTAL COST (Rp) 1,302,805,692 27,950,832

43 Universitas Indonesia
(Source: Gathered from several sources)

44 Universitas Indonesia
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Based on the calculation in Table 2.15, the total raw material cost (including
packaging cost) for ShoeCozy with the amount Rp 1,302,805,692 for total order
cost per year and the amount of Rp 27,950,832 for total delivery cost per year.
B. Direct and Indirect Labour Salary
ShoeCozy plan operates 8 hours per day and 5 days a week. The
labours are classified into direct and indirect labours. Direct labours are
those who are directly involved in the production process, while indirect
labours are not working directly in the manufacturing process. The salary
guide is obtained from Kelly & Intelligence Corporate Offices 2018 Salary
Guide for Indonesia. The minimum regional salary of Cikupa,Tangerang is
3.2 million Rupiah. The tables below show the details of direct and
indirect labour salary respectively.

Table 2.16 Direct Labor Cost

Salary per month Total Salary


Position Amount (person)
per person (Rp) (Rp)
Operator 3 3,200,000 115,200,000
Quality Controller 1 3,200,000 38,400,000
Warehouseman 2 3,200,000 76,800,000
TOTAL DIRECT LABOR COST 230,400,000
(Source: Kelly & Intellegence Corporate Offices 2018 Salary Guide for Indonesia)

Table 2.17 Indirect Labor Cost

Department Position Amount Salary Total Salary


(Person per (Rp)
) month
per

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person
(Rp)
President 12,000,00
Stakeholder 1 144,000,000
Director 0
Finance
Finance Department Accounting 1 6,000,000 72,000,000
Manager
Security and
2 3,200,000 76,800,000
Driver
General Support & Receptionist
1 4,000,000 38,400,000
Service and secretary
Cleaning
1 3,200,000 38,400,000
Service
Production and
1 6,000,000 86,400,000
QC Manager
Production Supply Chain
Department Management
1 6,000,000 72,000,000
and Logistic
Manager
Sales and Marketing Marketing and
1 6,000,000 72,000,000
Department Sales Manager
TOTAL INDIRECT LABOR COST 816,000,000
(Source: Kelly & Intellegence Corporate Offices 2018 Salary Guide for Indonesia)
Based on the calculation above, the total wages for direct labours is
and for indirect labours is Rp 230,400,000 and for direct labour is Rp
816,000,000. Thus, the annual expenses would be Rp 1,046,400,000.

C. Utility
Utility can be defined as the supporting system that helps the
industry to keep operating. It includes electricity, water, steam, etc. In this
plant, we only need electricity and water to stay operating. PT Adi
Samavin’s electricity is supplied from PLN which has specific range of
price according to the tariff group. The power limit and price for each
tariff group is shown on the table below.

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47

Table 2.18 Price for Electricity Based on Tariff Group

Usage Cost
No. Tariff Group Power Limit
(Rp/kWh)
1 R-1/TR 1300 VA 1467.28

2 R-1/TR 2200 VA 1467.28

3 R-2/TR 3500 - 5500 VA 1467.28

4 R-3/TR > 6600 VA 1467.28

5 B-2/TR 6600 VA - 200 kVA 1467.28

6 B-3/TM > 200 kVA 1114.74

7 I-3/TM > 200 kVA 1114.74

8 I-4/TT > 30,000 kVA 996.74

9 P-1/TR 6600 VA - 200 kVA 1467.28

10 P-2/TM > 200 kVA 1114.74

11 P-3/TR - 1467.28
(Source: PLN Data)
PT Adi Samavin is categorized as middle scale industry, therefore utilizes
the electricity in tariff group I-3/TM which has the usage cost per kWh set to Rp
1114,74 The two tables below show the total cost for the electricity of all
equipment.

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Table 2.19 Total Electricity Cost for Main Equipments

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

Mixer VPower H-30 1 1.5 4.165 6.2475 1561.875 1741084.538

Pneumatic Filling
Machine CJXH – 1 1 20 20 5000 5573700
900C
Shrink Wrap Machine
1 2 5 10 2500 2786850
304
Total Electricity Cost for Main Equipments 10,101,634.54
(Source: Gathered from several sources)

48 Universitas Indonesia
Table 2.20 Total Electricity Cost for Supporting Equipments

Total
Working Total Power/year Total
Equipments Qty Power (kW) Power/day
Time/day (h) (kWh) Cost/year (Rp)
(kWh)
Computer 3 0.3 9 8.1 2,138 2,383,760
Printer & Photocopy Machine 1 0.5 9 4.5 1,188 1,324,311
Fax Machine 1 0.02 9 0.18 48 52,972
Air Conditioner 2 0.75 9 13.5 3,564 3,972,933
Projector Set 1 0.2 4 0.8 211 235,433
CCTV 6 0.025 24 3.6 950 1,059,449
Long Neon Lamp 10 0.02 15 3 792 882,874
Internet Router 1 0.006 9 0.054 14 15,892
Dispenser 2 0.35 9 6.3 1,663 1,854,036
TOTAL ELECTRICITY COST FOR SUPPORTING EQUIPMENTS 11,781,660
(Source: Gathered from several sources)

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Besides the electricity, water is another supporting component


which is highly needed in this plant. Based on research, human needs 3
litre of water a day for drinking and 20 litre per day to do other activities
like toilet use, etc. For equipment cleansing, PT Adi Samavin generalizes
each equipment to need 10 litre of water per day. The water supplier is
PDAM which costs Rp 12,550.00 / m3 of water. Water which is used for
drinking costs Rp 17,000.00 / 19 litre.

Table 2.21 Total Cost for Water per Year

Water Needs L/ m3/yea Total Cost for Water/year


day r (Rp)
Mixer Cleansing 40 10 125,500
Drinking water (15
30 7.5 6,710,526.31
people)
Other needs of employee
300 75 941,250
(15 people)
TOTAL COST FOR WATER PER YEAR 7,777,276.31
(Source: Gathered from several references)

Based on the calculation, the total cost for water per year is Rp
7,777,276.32. Therefore, the total utility cost would be:
Total Cost for Utility=Total Cost for Electrcity +Total Cost for Water
¿ ( 10,101,634.54+11,781,660 )+7,777,276.32
= Rp 29,660,571.16
D. Maintenance Cost
Maintenance cost is defined as the costs incurred to keep an item in
good condition or good working order. Maintenance activity can be done
by repairing, adjusting, or replacing part of the equipment that is not
working properly. There are few types of maintenance, such as preventive
maintenance, predictive maintenance and corrective maintenance.
Maintenance is categorized into three main classifications, such as major
equipment maintenance, supporting equipment maintenance and plant and
office building maintenance. The cost per year of each component is 15%
of total bare module cost for main equipment, 3% of supporting facilities
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cost for supporting equipment and 1% of land and building cost for land
and building. The table below shows the total maintenance cost per year
for ShoeCozy factory. As seen on the table, the total cost would be Rp
53,113,017.

Table 2.22 Total Maintenance Cost per Year

Cost per Year


Maintenance Amount (Percentage)
(Rp)
15 % of Total Bare Module
Main Equipment 30,788,337.43
Cost
3% of Supporting Facilities
Supporting Equipment 8,044,680
Cost
Land and Building 1% of Land and Building Cost 14,280,000
TOTAL MAINTENANCE COST PER YEAR (Rp) 53,113,017
(Source: Gathered from several references)
E. Patent and Brand Registration
Patent is defined as government authority conferring a right or title for a
set period in using or selling an invention. This product has to be registered first to
have the patent so other people will not be able to use them freely because it is
against the law. Besides that, the other law-related essentials are the copyright,
industrial design and brand. Shown below the cost for each essential.

Table 2.23 Total Cost for Patent

Patent Per Patent Qty Per Claim Qty Cost (Rp)


Year 2 0 1 0 16 0
Year 3 0 1 0 16 0
Year 4 0 1 0 16 0
Year 5 0 1 0 16 0
Year 6 1,500,000 1 150,000 16 3,900,000
Year 7 2,000,000 1 200,000 16 5,200,000
Table 2.23 Total Cost for Patent (Continued)

Patent Per Patent Qty Per Claim Qty Cost (Rp)


Year 8 2,000,000 1 200,000 16 5,200,000
Year 9 2,500,000 1 250,000 16 6,500,000

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Year
3,500,000 1 250,000 16 7,500,000
10
TOTAL 28,300,000
(Source: Peraturan Pemerintah No.45 Tahun 2016)

 Copyright

Table 2.24 Total Cost for Copyright

Copyright Cost (Rp)


Copyright Registration 400,000
Copyright Certificate Publishing Cost 100,000

Copyright Quotes Registration 100,000


Copyright License Administration 100,000
TOTAL 700,000
(Source: Peraturan Pemerintah No.45 Tahun 2016)

 Industrial Design

Table 2.25 Total Cost for Industrial Design

Industrial Design Cost (Rp)


Industrial Design Registration 800,000
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 200,000
TOTAL 1,600,000
(Source: Peraturan Pemerintah No.45 Tahun 2016)

 Brand

Table 2.26 Total Cost for Brand

Brand Cost (Rp)


Brand Publishing Cost 400,000
Lengthening Time of Brand Protection 5,000,000

Brand Certificate Publishing Cost 300,000


License Administration 250,000
Official Brand Quotes Request 1,500,000
Written Notes of General List of Brand Request 1,500,000

TOTAL 8,950,000
(Source: Peraturan Pemerintah No.45 Tahun 2016)

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Based on those calculations, the summary for patent and brand


registrations cost is shown in table below.

Table 2.27 Summary of Patent and Brand Registration Cost

Type Cost (Rp)


Patent 28,300,000
Copyright 700,000
Industrial Design 1,600,000
Brand 8,950,000
TOTAL 39,550,000
F. Fixed Cost
Fixed costs are the ones that will not change due to the amount of
production. They are fixed each year. Fixed costs include depreciation, local tax
and insurance.
 Depreciation

Depreciation is known as an accounting method of allocating the cost of a


tangible asset over its useful life. It can also be said that it is a measure of the
decrease in value of something over time. Depreciation is used by company to set
aside a fund to replace a plant when it is no longer operable. The calculation is
based on the government federal income tax determination. For the ShoeCozy
product, the calculation of depreciation use the declining-balance method. The
formula is shown below:

D1=V i . f (2.6)
n
SV =V i ( 1−f ) (2.7)
where f is the factor to the value of properties each year, D is the depreciation and
SV is the salvage value for each year. In this case, the f factor that is used is in the
amount of 10%.

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Table 2.28 Total Depreciation for Main Equipment
Initial
Year 1 Year 2 Year 3 Year 4
Equipments Value
(Rp) D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp)
Mixer H30 10,835,897 1,083,590 9,752,307 975,230.73 8,777,077 877,707.65 7,899,369 789,936.89 7,109,432
Filling Machine CJXH-800 C 72,239,313 7,223,931 65,015,382 6,501,538.17 58,513,844 5,851,384.36 52,662,459 5,266,245.92 47,396,213

Packaging Machine 44,412,730 4,441,273 39,971,457 3,997,145.67 35,974,311 3,597,431.10 32,376,880 3,237,687.99 29,139,192

12,748,79
TOTAL DEPRECIATION 11,473,915 10,326,523 9,293,871
4

Year 5 Year 6 Year 7 Year 8 Year 9 Year 10


Equipments
D (Rp) D (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp)
710,943.20 6,398,489 639,848.88 5,758,640 575,863.99 5,182,776 518,277.59 4,664,498 466,449.8 4,198,048 419,804.85 3,778,244
Mixer H30
3
Filling Machine 4,739,621.3 42,656,592 4,265,659.2 38,390,933 3,839,093.2 34,551,839 3,455,183.9 31,096,65 3,109,665. 27,986,99 2,798,699.0 25,188,291
CJXH-800 C 3 0 8 5 6 55 0 0
Packaging 2,913,919.1 26,225,273 2,622,527.2 23,602,745 2,360,274.5 21,242,471 2,124,247.0 19,118,22 1,911,822. 17,206,40 1,720,640.1 15,485,761
Machine 9 7 5 9 4 38 1 4
TOTAL 8,364,484 7,528,035 6,775,232 6,097,709 5,487,938 4,939,144
DEPRECIATION

54 Universitas Indonesia
Table 2.29 Total Depreciation for Supporting Equipment

55 Universitas Indonesia
Initial
Year 1 Year 2 Year 3 Year 4 Year 5
Equipments Value
(Rp) D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp)
Sofa 2,000,000 200,000 1,800,000 180,000.00 1,620,000 162,000.00 1,458,000 145,800.00 1,312,200 131,220.00 1,180,980
12,600,00 1,260,00 11,340,00 1,134,000.0 10,206,00 1,020,600.0
Computer (Asus) 9,185,400 918,540.00 8,266,860 826,686.00 7,440,174
0 0 0 0 0 0
Receptionist
1,000,000 100,000 900,000 90,000.00 810,000 81,000.00 729,000 72,900.00 656,100 65,610.00 590,490
Desk
Air Conditioner 7,000,000 700,000 6,300,000 630,000.00 5,670,000 567,000.00 5,103,000 510,300.00 4,592,700 459,270.00 4,133,430
Dispenser 600,000 60,000 540,000 54,000.00 486,000 48,600.00 437,400 43,740.00 393,660 39,366.00 354,294
Printer & 10,000,00 1,000,00
9,000,000 900,000.00 8,100,000 810,000.00 7,290,000 729,000.00 6,561,000 656,100.00 5,904,900
Fotocopy 0 0
Office Desk 2,000,000 200,000 1,800,000 180,000.00 1,620,000 162,000.00 1,458,000 145,800.00 1,312,200 131,220.00 1,180,980
Office Chairs 750,000 75,000 675,000 67,500.00 607,500 60,750.00 546,750 54,675.00 492,075 49,207.50 442,868
200,000,0 20,000,0 180,000,0 18,000,000. 162,000,0 16,200,000. 145,800,0 14,580,000. 131,220,0 13,122,000. 118,098,0
Genset
00 00 00 00 00 00 00 00 00 00 00
Locker 400,000 40,000 360,000 36,000.00 324,000 32,400.00 291,600 29,160.00 262,440 26,244.00 236,196
Meeting Desk
6,000,000 600,000 5,400,000 540,000.00 4,860,000 486,000.00 4,374,000 437,400.00 3,936,600 393,660.00 3,542,940
Set
Cupboards 2,400,000 240,000 2,160,000 216,000.00 1,944,000 194,400.00 1,749,600 174,960.00 1,574,640 157,464.00 1,417,176
Whiteboard 300,000 30,000 270,000 27,000.00 243,000 24,300.00 218,700 21,870.00 196,830 19,683.00 177,147
Telephone 500,000 50,000 450,000 45,000.00 405,000 40,500.00 364,500 36,450.00 328,050 32,805.00 295,245
Recyle Bin 300,000 30,000 270,000 27,000.00 243,000 24,300.00 218,700 21,870.00 196,830 19,683.00 177,147
Toilet Set 8,000,000 800,000 7,200,000 720,000.00 6,480,000 648,000.00 5,832,000 583,200.00 5,248,800 524,880.00 4,723,920
Fire
Extinguisher 4 1,206,000 120,600 1,085,400 108,540.00 976,860 97,686.00 879,174 87,917.40 791,257 79,125.66 712,131
kg
First Aid
200,000 20,000 180,000 18,000.00 162,000 16,200.00 145,800 14,580.00 131,220 13,122.00 118,098
Medicine
Carpet for
1,050,000 105,000 945,000 94,500.00 850,500 85,050.00 765,450 76,545.00 688,905 68,890.50 620,015
Praying Room
CCTV 8,000,000 800,000 7,200,000 720,000.00 6,480,000 648,000.00 5,832,000 583,200.00 5,248,800 524,880.00 4,723,920
Long Neon
750,000 75,000 675,000 67,500.00 607,500 60,750.00 546,750 54,675.00 492,075 49,207.50 442,868
Lamp
Internet Router 300,000 30,000 270,000 27,000.00 243,000 24,300.00 218,700 21,870.00 196,830 19,683.00 177,147
Projector Set 1,300,000 130,000 1,170,000 117,000.00 1,053,000 105,300.00 947,700 94,770.00 852,930 85,293.00 767,637
Fax Machine 1,500,000 150,000 1,350,000 135,000.00 1,215,000 121,500.00 1,093,500 109,350.00 984,150 98,415.00 885,735
26,815,6
Total 24,134,040 21,720,636 19,548,572 17,593,715
00

56 Universitas Indonesia
Table 2.29 Total Depreciation for Supporting Equipment (Continued)

57 Universitas Indonesia
Year 6 Year 7 Year 8 Year 9 Year 10
Equipments
D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp)
Sofa 118,098.00 1,062,882 106,288.20 956,594 95,659.38 860,934 86,093.44 774,841 77,484.10 697,357
4,881,49
Computer (Asus) 744,017.40 6,696,157 669,615.66 6,026,541 602,654.09 5,423,887 542,388.68 488,149.82 4,393,348
8
Receptionist Desk 59,049.00 531,441 53,144.10 478,297 47,829.69 430,467 43,046.72 387,420 38,742.05 348,678
2,711,94
Air Conditioner 413,343.00 3,720,087 372,008.70 3,348,078 334,807.83 3,013,270 301,327.05 271,194.34 2,440,749
3
Dispenser 35,429.40 318,865 31,886.46 286,978 28,697.81 258,280 25,828.03 232,452 23,245.23 209,207
3,874,20
Printer & Fotocopy 590,490.00 5,314,410 531,441.00 4,782,969 478,296.90 4,304,672 430,467.21 387,420.49 3,486,784
5
Office Desk 118,098.00 1,062,882 106,288.20 956,594 95,659.38 860,934 86,093.44 774,841 77,484.10 697,357
Office Chairs 44,286.75 398,581 39,858.08 358,723 35,872.27 322,850 32,285.04 290,565 29,056.54 261,509
11,809,800 106,288,20 10,628,820. 9,565,938. 86,093,44 8,609,344. 77,484,0 7,748,409.
Genset 95,659,380 69,735,688
.00 0 00 00 2 20 98 78
Locker 23,619.60 212,576 21,257.64 191,319 19,131.88 172,187 17,218.69 154,968 15,496.82 139,471
2,324,52
Meeting Desk Set 354,294.00 3,188,646 318,864.60 2,869,781 286,978.14 2,582,803 258,280.33 232,452.29 2,092,071
3
Cupboards 141,717.60 1,275,458 127,545.84 1,147,913 114,791.26 1,033,121 103,312.13 929,809 92,980.92 836,828
Whiteboard 17,714.70 159,432 15,943.23 143,489 14,348.91 129,140 12,914.02 116,226 11,622.61 104,604
Telephone 29,524.50 265,721 26,572.05 239,148 23,914.85 215,234 21,523.36 193,710 19,371.02 174,339
Recyle Bin 17,714.70 159,432 15,943.23 143,489 14,348.91 129,140 12,914.02 116,226 11,622.61 104,604
3,099,36
Toilet Set 472,392.00 4,251,528 425,152.80 3,826,375 382,637.52 3,443,738 344,373.77 309,936.39 2,789,428
4
Fire Extinguisher 4 kg 71,213.09 640,918 64,091.78 576,826 57,682.61 519,143 51,914.35 467,229 46,722.91 420,506
First Aid Medicine 11,809.80 106,288 10,628.82 95,659 9,565.94 86,093 8,609.34 77,484 7,748.41 69,736
Carpet for Praying Room 62,001.45 558,013 55,801.31 502,212 50,221.17 451,991 45,199.06 406,792 40,679.15 366,112
3,099,36
CCTV 472,392.00 4,251,528 425,152.80 3,826,375 382,637.52 3,443,738 344,373.77 309,936.39 2,789,428
4
Long Neon Lamp 44,286.75 398,581 39,858.08 358,723 35,872.27 322,850 32,285.04 290,565 29,056.54 261,509
Internet Router 17,714.70 159,432 15,943.23 143,489 14,348.91 129,140 12,914.02 116,226 11,622.61 104,604
Projector Set 76,763.70 690,873 69,087.33 621,786 62,178.60 559,607 55,960.74 503,647 50,364.66 453,282
Fax Machine 88,573.50 797,162 79,716.15 717,445 71,744.54 645,701 64,570.08 581,131 58,113.07 523,018
Total 15,834,344 14,250,909 12,825,818 11,543,237 10,388,913

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Table 2.30 Total Depreciation for Building
Initial Value Year 1 Year 2 Year 3
Equipments
(Rp) D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp)
Building 708,000,000 70,800,000 637,200,000 63,720,000.00 573,480,000 57,348,000.00 516,132,000
TOTAL
70,800,000 63,720,000 57,348,000
DEPRECIATION

Year 4 Year 5 Year 6


Equipments
D (Rp) SV (Rp) D (Rp) D (Rp) D (Rp) SV (Rp)
Building 51,613,200.00 464,518,800 41,806,692 41,806,692 46,451,880.00 418,066,920
TOTAL
DEPRECIATIO 51,613,200 41,806,692 41,806,692 46,451,880
N

Year 7 Year 8 Year 9 Year 10


Equipments
D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp) D (Rp) SV (Rp)
338,634,20 304,770,78 274,293,70 246,864,33
Building 37,626,022 33,863,420 30,477,078 27,429,370
5 5 6 6
TOTAL
37,626,023 33,863,421 30,477,078 27,429,371
DEPRECIATION

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Due to the calculation above, the total depreciation for a life expectancy of
10 years is shown on the table below.

Table 2.31 Total Depreciation Cost for 10 Years Life Expectancy


Year Depreciation (Rp)
1 110,364,394
2 99,327,955
3 89,395,159
4 80,455,643
5 72,410,079
6 65,169,071
7 58,652,164
8 52,786,948
9 47,508,253
10 42,757,427
TOTAL DEPRECIATION 718,827,092

 Local Tax
The tax used is based on the government’s law. Local tax inclues building
and salary tax. Building tax consists of the tax for the building as well as for the
land. Show below the tax calculation for building and salary tax.

Table 2.32 Cost for Building Tax


Description Area (m2) Price (Rp/m2) Total Price (Rp)
NJOB Land 240 3,000,000 720,000,000
3,000,000 600,000,000
72,000,000 72,000,000
NJOB Building 200
36,000,000 36,000,000
Total 708,000,000
Total NJOP 1,428,000,000
NJOPTKP 12,000,000
NJOP for PBB 1,416,000,000
NJKP (40% NJOP) 566,400,000
Debted PBB (0.5 NJKP) 2,832,000

Salary tax is compulsory to be paid by all workers. The tax value is based
on UU PPH No. 21 and Peraturan Direktorat Jenderal Pajak No. 32 year 2015.

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Table 2.33 Cost for Salary Tax
Net
Salary per
Amount Bruto Position Income Net Income Taxable Salary Tax
Position month per Insurance
(person) Income Cost per per Year Income Per Year
person (Rp)
Month
President
1 12,000,000 748,800 12,748,800 637,440 12,111,360 145,336,320 91,336,320 13,700,448
Director
Finance
Accounting 1 6,000,000 374,400 6,374,400 318,720 6,055,680 72,668,160 18,668,160 933,408
Manager
Security and
2 3,200,000 199,680 3,399,680 169,984 3,229,696 38,756,352 0 0
Driver
Receptionist
1 4,000,000 249,600 4,249,600 212,480 4,037,120 48,445,440 0 0
and Secretary
Cleaning
1 3,200,000 199,680 3,399,680 169,984 3,229,696 38,756,352 0 0
Service
Production
Coordinator
1 6,000,000 374,400 6,374,400 318,720 6,055,680 72,668,160 18,668,160 933,408
and QC
Manager
Supply Chain
Management
1 6,000,000 374,400 6,374,400 318,720 6,055,680 72,668,160 18,668,160 933,408
and Logistic
Manager
Marketing and
1 12,500,000 780,000 13,280,000 664,000 12,616,000 151,392,000 97,392,000 14,608,800
Sales Manager
Marketing
1 5,500,000 343,200 5,843,200 292,160 5,551,040 66,612,480 12,612,480 630,624
Communication

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Table 2.33 Cost for Salary Tax (continued)
Net
Salary per Net
Amount Bruto Position Income Taxable Salary Tax Per
Position month per Insurance Income
(person) Income Cost per Income Year
person (Rp) per Year
Month
Sales / 54,501,12
1 4,500,000 280,800 4,780,800 239,040 4,541,760 501,120 25,056
Promotor 0
48,445,44
Operator 3 4,000,000 249,600 4,249,600 212,480 4,037,120 0 0
0
Quality 38,756,35
1 3,200,000 199,680 3,399,680 169,984 3,229,696 0 0
Controller 2
38,756,35
Warehouseman 2 3,200,000 199,680 3,399,680 169,984 3,229,696 0 0
2
Total Tax Salary 31,765,152
Total Tax 34,597,152

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Based on the calculation, the total tax is Rp 34,597,152.

 Insurance

The paid insurance consists of insurance for cost of plant and for
employee. The data for the employee’s tax is from Jamsostek (Jaminan
Pemeliharaan Kesehatan). The measurement value for plant insurance is 0.5%
from fixed cost and employee’s insurance measurement value worths 6.24% of
salary.
Table 2.34 Total Cost for Insurance
Insurance Type Measurement Amount Annual Cost
0.5% of Fixed Capital
Plant Insurance 10,424,261
Investment Cost 2,084,852,154
Employee's
6.24% of Salary 1,052,400,000 65,669,760
Insurance
Total Insurance 76,094,021

2.2.2 General Expense


The general expense consists of supporting materials to support the
plant’s operational activity. It includes distribution cost, marketing cost and
communication cost.
A. Communication Cost

Table 2.35 Total Communication Cost

Communication Type Cost (Rp) Note


Telephone 5,000,000 Telkom
Internet Connection 3,948,000 MyRepublic
TOTAL COMMUNICATION
COST 8,948,000

B. Distribution Cost

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As explained on chapter 1, the distribution system of this product will be a


retailing system in which PT Adi Samavin distributes and stocks this product to
wholesaler like Kimia Farma, Guardian and Indomaret.

Table 2.36 Total Distribution Cost


Distanc Solar Total Cost Total Cost
e Consumption per Week per Year
Route Pathway Frequency (km) (L) (Rp) (Rp)
Kem Chicks
Distribution Service to
Planet Sport Once a
Distribution Service Land week 7.6 1.5 7,725 401,700
Sneaklin Distribution Once a
Service to Kem Chicks week
Distribution Service Land 3.5 0.6 3,090 160,680
Shoes and Care Once a
Distribution Service to week
Sneaklin Distribution
Service Land 2.9 0.5 2,575 133,900
Plant to Shoes and Land Once a
Care Distribution week
Service 39 7 36,050 1874,600
Planet Sport Land Once a
Distribution Service to week
Cleanvast Distribution
Service 3.5 0.6 3,090 160,680
Back to Plant Land Once a
week 39 7 36,050 1,874,600
Toll Fee 33,000 1,716,000
Rent a Pick Up Car 500,000 26,000,000
Total Distribution Cost 32,322,160

C. Marketing Cost
Here are the cost of our three marketing methods per year. The three are:
 Printed Media

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Table 2.37 Total Cost for Printed Media


Printed Media Type Total Cost (Rp)
Brochure (50 each store every 2 Full colour
7,524,000
months) display
Printed
Hai Magazine 30,000,000
Advertisement
Full colour
Booklet (200 pcs every 4 months) 9,505,500
display
Total Cost For Printed Media 47,029,500

The company will printed the brochure every 2 months, and each store will
promote the product with 50 brochures. The brochures will be distributed in
teenagers events or at other public places. The company also put our
advertisement on Hai Magazine as it is believed to still be number one magazine
for men or women in Indonesia.
 Web Address

Table 2.38 Total Cost for Web Adress

Time Price / day Price / year


Web Address
(Adv/day) (Rp) (Rp)
Linked In - Free Free
Google Adsense - Free Free
Social Media (Instagram
- Free Free
Facebook, Twitter)
iklan-gratis.com - Free Free
www.detik.com 30 210,000 76,650,000
Total Online Advertisement Cost 76,650,000

 Website

Table 2.39 Total Cost for Website

Cost / year
Types
(Rp)
Creating Website Cost 2,200,000
Annual Cost 660,000
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Since social media and the other online platforms have been growing
rapidly lately, the company hope to fully maximize those online facilities so
people from the another cities and neighboring countries would also be able to be
familiar with our product. Some of the platforms that we use are free of charge,
including linked in, google adsense, Instagram, Facebook and Twitter. Another
web address that is free is iklan-gratis.com. Each day, the advertisement will be
shown 30 times for the whole year.
2.3 Economic Analysis
2.3.1 Capital Loan
All of the capital investment needed for the plant will be from bank loan.
The company choose to get the loan from Bank Central Asia (BCA) because it is
known as trusted bank in Indonesia, the interest rate of loan is 9.75%. This capital
investment include cost to build our plant site, buy process equipment, and
operational cost for the first month of production activity (the company have no
income in the first month of this production activity, income from the product’s
selling will be received at the end of first month). The loan repayment will be
completed in the end of tenth years of our plant life. The amount of capital loan
and cash flow of loan payment can be seen in table below.

Table 2.40 Cash Flow of Capital Loan

Total Loan after


Year Initial Loan Loan Interest Payment
Payment Payment
0 2,564,368,149 2,564,368,149
1 2,564,368,149 250,025,895 256,436,815 506,462,710 2,307,931,335
2 2,307,931,335 225,023,305 256,436,815 481,460,120 2,051,494,520
3 2,051,494,520 200,020,716 256,436,815 456,457,531 1,795,057,705
4 1,795,057,705 175,018,126 256,436,815 431,454,941 1,538,620,890
5 1,538,620,890 150,015,537 256,436,815 406,452,352 1,282,184,075
6 1,282,184,075 125,012,947 256,436,815 381,449,762 1,025,747,260
7 1,025,747,260 100,010,358 256,436,815 356,447,173 769,310,445
8 769,310,445 75,007,768 256,436,815 331,444,583 512,873,630

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Table 2.40 Cash Flow of Capital Loan (continued)


Total Loan after
Year Initial Loan Loan Interest Payment
Payment Payment
9 512,873,630 50,005,179 256,436,815 306,441,994 256,436,815
10 256,436,815 25,002,589 256,436,815 281,439,404 0

2.3.2 Product Pricing


Price of product is determined by the calculation of minimum product
price which is the price needed to cover capital cost and all of expenses during our
plant life (10 years). The calculation of the product minimum price involves
operational expenses, depreciation, maintenance cost, interest. Sum of operational
expenses, depreciation, and maintenance cost will become total outcome,
minimum price is obtained by dividing it with the production capacity for 10
years of this plant life.

Table 2.41 Minimum Price of Product Calculation

OPEX for 10 Years 26,879,749,279.30


Total Depreciation 718,827,092.36
Maintenance 531,130,174.31
Interest 1,375,142,420.15
Total Outcome 29,504,848,966.11
10 years Production
1,250,000
Capacity
Minimum Price Per Unit 23,603.88

The minimum price for ShoeCozy product is Rp. 23,603.88, we choose selling
price of our product will be Rp.50,000 with marginal advantage of 112%.
2.3.3 Cash Flow
Cash flow diagram of the company project is made to simplify all of the
expenses and income, the company use cash flow to depict money flows annually.
The cash flow consists of incomes and expenses or outcomes. Incomes are
positive flow of money which represents revenue, before tax income, after tax
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income, and salvage value, whereas expenses are negative flow of money which
represents first investment, operating cost, loan payment, and interest payment.
The assumption made about the number of products sold per year: in the first year
products sold is 60% of the company production, in second year 70%, in third
year 80%, and in fourth until tenth year product sold is 90% of production
capacity.

Figure 2.3 Cashflow (prices are in million rupiah)

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Table 2.42 Cash Flow (prices are in million rupiah)

Volume Product Operating Maintenance


Year Sold Price Revenue Expenses Cost Depreciation Cash Expenses Loan Interest
2018 0 0 0 0 0 0 0 0
2019 75,000 3,750,000,000 2,685,144,928 53,113,017 110,364,394 2,738,257,945 250,025,895
2020 87,500 4,375,000,000 2,685,144,928 53,113,017 99,327,955 2,738,257,945 225,023,305
2021 100,000 5,000,000,000 2,685,144,928 53,113,017 89,395,159 2,738,257,945 200,020,716
2022 112,500 5,625,000,000 2,685,144,928 53,113,017 80,455,643 2,738,257,945 175,018,126
2023 112,500 5,625,000,000 2,685,144,928 53,113,017 72,410,079 2,738,257,945 150,015,537
50,000
2024 112,500 5,625,000,000 2,689,044,928 53,113,017 65,169,071 2,742,157,945 125,012,947
2025 112,500 5,625,000,000 2,690,344,928 53,113,017 58,652,164 2,743,457,945 100,010,358
2026 112,500 5,625,000,000 2,690,344,928 53,113,017 52,786,948 2,743,457,945 75,007,768
2027 112,500 5,625,000,000 2,691,644,928 53,113,017 47,508,253 2,744,757,945 50,005,179
2028 112,500 5,625,000,000 2,692,644,928 53,113,017 42,757,427 2,745,757,945 25,002,589
SV 384,816,847 0 0 0 0 0
TOTAL 1,050,000 - 52,884,816,847 26,879,749,279 531,130,174 718,827,092 27,410,879,454 1,375,142,420
Table 2.42 Cash Flow (prices are in million rupiah) (continued)

Cummulative Cash
Year All Expenses Gross Profit BTCF ATCF Cash Flow Flow
2018 0 0 (2,564,368,149) (2,564,368,149) (2,564,368,149) (2,564,368,149)
2019 3,098,648,234 1,011,742,055 651,351,766 488,513,825 598,878,219 (1,965,489,931)
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2020 3,062,609,205 1,636,742,055 1,312,390,795 984,293,096 1,083,621,051 (881,868,880)
2021 3,027,673,820 2,261,742,055 1,972,326,180 1,479,244,635 1,568,639,794 686,770,914
2022 2,993,731,715 2,886,742,055 2,631,268,285 1,973,451,214 2,053,906,857 2,740,677,771
2023 2,960,683,561 2,886,742,055 2,664,316,439 1,998,237,329 2,070,647,408 4,811,325,179
2024 2,932,339,964 2,882,842,055 2,692,660,036 2,019,495,027 2,084,664,098 6,895,989,277
2025 2,902,120,467 2,881,542,055 2,722,879,533 2,042,159,650 2,100,811,814 8,996,801,091
2026 2,871,252,661 2,881,542,055 2,753,747,339 2,065,310,504 2,118,097,452 11,114,898,543
2027 2,842,271,377 2,880,242,055 2,782,728,623 2,087,046,467 2,134,554,720 13,249,453,263
2028 2,813,517,962 2,879,242,055 2,811,482,038 2,108,611,528 2,151,368,956 15,400,822,218
SV 0 384,816,847 384,816,847 288,612,635 288,612,635 15,689,434,854
TOTAL 29,504,848,966 25,473,937,394 20,815,599,732 14,970,607,761 15,689,434,854

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To ensure that the project and plant production is feasible, Internal Rate of
Return (IRR) should be determined using Net Present Value (NPV) study. The
determination of both parameter is further calculated in the next section. First, we
should decide the WACC (Weighted Average Cost Capital) of our product:
WACC=Equity cost+ Debt cost
E D
WACC= Re+ Rd
V V (2.8)
Where Re is cost of equity, Rd is cost of debt, E/V is % financing for equity, D/V
is % financing for debt
Cost of debt is rates which is offered by monetary institution such bank
that should be paid. Cost of debt can be calculated with the following equation.
Rd =( Debt rate∗(1−Tax rate ) ) (2.9)

Rf ∗+ ( β∗( risk market rate−R f ) )


Rd=¿
where Rf is Risk Free Rate
To calculate cost of debt and cost of equity, the company should decide
beta factor, risk free rate and tax to ensure that our project is attractive. Based on
literature, Table below show WACC variable we obtained.

Table 2.43 WACC Calculation Parameter


Variable Chemical (Specialities)
Number of Firms 103
Beta 1.03
Cost of Equity 15.61%
E
82.40%
D+E
Std. Dev in Stock 51.80%
Cost of Debt 11.42%
Tax Rate 11.16%
After-Tax Cost of Debt 7.99%

Table 2.43 WACC Calculation Parameter (continued)


Variable Chemical (Specialities)
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D 17.60%
V
Cost of Capital 14.27%

By using equation above which substitutes it with parameter in table,


WACC value is 14.65%. The value of MARR should be higher or at least the
same as WACC (WACC ≤ MARR) so that PT Adi Samavin will get profit from
the business. For MARR value, PT Adi Samavin uses 15%.
2.3.4 Cost Breakdown
Cost breakdown is done to see which variable is dominate the cost
expenses. By using the cost breakdown diagram, the companies can determine
which variables are most widely affected production expenditure.

Table 2.44 Cost Breakdown Data

Description Amount (%)


Salary 10,524,000,000
Raw Material 13,324,815,240
Electricity 218,832,948
Water 77,772,763
Patent 28,300,000
Tax 345,971,520
Insurance 760,940,208
Communication
Cost 12,500,000
Distribution Cost 323,221,600
Publication and
Advertising Cost 1,263,395,000
TOTAL 531,130,174

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Cost Breakdown
Salary
10.72% Raw Material
0.04% Electricity
4.19% Water
2.52% 34.89%
Patent
2.29%
Tax
0.19%
Insurance
0.26% Communication Cost
0.73% Distribution Cost
Publication and Advertising Cost
44.18%

Figure 2.4 Cost Breakdown Diagram


It can be seen that raw material dominated the company expenses with
44.98%, other variable that dominate expenses is salary (35.527%). These two
variables are sensitive parameter which will affect our profit significantly,
moreover it will be detailed discussed in chapter 3.

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CHAPTER 3
PROFITABILITY AND SENSITIVITY ANALYSIS

3.1 Rate of Return/Return of Investment


Rate of Return (ROR) or Return of Investment (ROI) is the annual interest
rate made by the profits on the original investment. ROI provides a snapshot view
of the profitability of the plant, normally using the estimates of the elements of the
investment and the pre-tax or after-tax earnings. For ROI, and all of the
approximate profitability measures of this section, the production cost is
computed using straight-line depreciation, and after some startup period, the plant
is assumed to operate each year at full capacity (or at some percentage of full
capacity) for the same number of days per year. As was stated earlier, many
definitions of ROI have been suggested and used. Here, the most common
definition is applied.
annual net profit
ROI= × 100
total capital investment
(3.1)
1,705,179,803
ROI= x 100
2,564,368,149
ROI = 66.5%
The amount of annual net profit is Rp 1,705,179,803 while the amount of
total capital investment is Rp 2,564,369,149. Based on the amount of ROI
(66.5%), ShoeCozy production is an interesting investment for investor,
considering the relatively high ROI.
3.2 Payback Period
The payback period is the time required for the annual earnings to equal
the original investment. Payback period is also called payout time, payout period,
payoff period, and cash recovery period. Payback period is widely used in early
evaluations to compare many alternatives because of it is simpler and more
undertandable than ROI. This parameter is one of the most considered one
because it determines the decision either to execute the project or not. High-risk
ventures should have payback periods of less than 2 years. In these times of rapid
progress in technology, most companies will not consider a project with a PBP
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more than 4 years. PBP is especially useful for simple equipment replacement
problems (Seider et al., 2003). Longer payback periods are not typical desirable
for investment positions. The calculation of payback period can be done by using
Eq. (3.2).
Depreciable FCI + Interest onTCI during service life
PBP= ×100
( avg . profit / year + avg . depreciation/ year )as constant annuity
(3.2)
where the FCI is Fixed Capital Investment and TCI is Total Capital Investment.
The analysis of payback period is calculated in ten years because ten years are
considered as the average years in economic analysis for the material and property
industrial’s service life. Based on the assumptions, the payback period is
calculated as follows.

Table 3.1 Payback Period Calculation


Cash Flow
Year Cummulative Cash Flow (Rp)
(Rp)
0 (2,564,368,149) (2,564,368,149)
1 729,148,572 (1,835,219,578)
2 1,346,099,210 (489,120,368)
3 1,963,105,030 1,473,984,662
4 2,580,160,514 4,054,145,176
5 2,603,510,696 6,657,655,872
6 2,623,196,106 9,280,851,978
7 2,645,387,720 11,926,239,698
8 2,668,846,919 14,595,086,617
9 2,691,100,445 17,286,187,062
10 2,713,665,363 19,999,852,425

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Cummulative Cash Flow
25,000,000,000
Cummulative Cash Flow (Rp)
20,000,000,000
f(x) = 2412236451.48x - 4668783723.24
15,000,000,000 R² = 0.99

10,000,000,000

5,000,000,000

0
0 2 4 6 8 10 12
(5,000,000,000)
Year

Figure 3.1 Cummulative Cash Flow vs. Year for Payback Period Calculation
The precise calculation of payback period time is done by using
interpolation method between the third and fourth year as follows.
PBP−4 0−685,725,098
=
3−4 ( 789,155,711 )−685,725,098
PBP=2,53506=633,765 ≈ 634 days

Based on the calculation, it can conclude that this shoes’ smell remover
product can get its payback in period less than 4 years, which is classified as
intermediate time that is proper to recover the cost of investment. So, the
production is acceptable.
3.3 Break Even Point
Breakeven point (BEP) is an analysis which is done to define and
determine the amount of goods or services that must be sold to the consumer with
a determined price to cover the costs that emerge and obtain profit. BEP analysis
is very important so there is no experience loss during the production. The
payback period of the plant is 2.53 years or equal with 634 days. Therefore, the
amount of production until the 634th day can be used to determine the breakeven
point. The calculation of BEP is shown in Table 3.2.

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Table 3.2 Breakeven Point Calculation
Sold Cumulative of
Product Sold Product
Years Days Product Sold Product
s /day (%)
(Units) (Units)
0 0 0 0% 0 0
1 250 500 60% 75000 75000
2 250 500 70% 87500 162500
2.53 132.5 500 80% 53000 215500
Based on the calculation in Table 3.2, for a payback period of 634 days,
the breakeven point when the plant has produced about 215,500 cans.
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. Eq. (3.3) can be used
to determine the IRR.
n=T
CF n
NPV =∑ −TCI=0 (3.3)
( 1+ r )n
n =1
where r is the value of IRR while TCI is the total capital investment. The
calculation of IRR is in Microsof Excel where there has a function to calculate
IRR for economic analysis. Based on the calculation, the obtained IRR is 58.5%.
The value of IRR must be compared with the MARR that has been
calculated previously to analyse the feasibility of this project. A project can be
determine as a feasible project if the IRR value is greater than MARR value. From
the previous chapter, the value of MARR is 14.86%. If we compare both value, it
can be concluded that the IRR value is greater than MARR value (58.5% >
14.86%). Therefore, we can also conclude that PT. Adi Samavin 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) is a value that shows the net benefits received by
a project over the life of the project at a certain interest rate. NPV can also be
interpreted as the present value of the cash flows generated by the investment.
During the calculation of NPV, the relevant interest rate is also have to be

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determined. For this calculation, the MARR used is that has been calculated
before, which is 14.86%.
Net present value can be calculated by Eq. (3.4)
C Fn
CF n , 0= (3.4)
( 1+i )n
where:
CFn = The net cash flow in time n
i = Interest rate used in the project
n = Time of the project
If NPV is greater than zero, it means that the project is profitable if it’s
executed while if the NPV is less than zero it means that project is not profitable
to run. Also, if the NPV equals to zero, it means that the project won’t result in
any profit or loss. From the calculation with Microsoft Excel, the NPV is obtained
as Rp 6,758,518,962.07. Because the NPV is greater than zero, based on NPV
calculation it can be concluded that this project is profitable.
3.6 Sensitivity Analysis
A sensitivity analysis is conducted to determine the effect of percentage
changes in pertinent variables on the profitability of the project. Such an analysis
indicates which variables are most susceptible to change and need further study
(Perry, 2007).

3.6.1 Selling Price Fluctuations


This type of sensitivity analysis was performed based on the fluctuation
of product sales price. The calculation of this analysis is done and is shown below
in the Table 3.3. The parameter which is observed in this calculation is the change
in economic viability parameter such as IRR, NPV, 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.

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Table 3.3 Selling Price Fluctuations
Chang Product Price per IRR PBP
NPV (Rp)
e Unit Tile (Rp) (%) (Years)
0.85 Rp 42,500 38.15% Rp 3,578,304,547.23 3.69821
0.9 Rp 45,000 47.60% Rp 4,639,345,689.90 3.24068
0.95 Rp 47,500 57.05% Rp 5,700,386,832.57 2.86455
1 Rp 50,000 66.50% Rp 6,761,427,975.23 2.53385
1.05 Rp 52,500 75.94% Rp 7,822,469,117.90 2.27452
1.1 Rp 55,000 85.39% Rp 8,883,510,260.57 2.06569
1.15 Rp 57,500 94.84% Rp 9,944,551,403.24 1.86901

3.6.2 Raw Material Cost Changes


Sensitivity analysis was also performed on the change of the operational
costs of this product. One of the most influential factor is the change of the raw
material cost. 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. Table 3.4 shows raw material
price fluctuation.

Table 3.4 Raw Materials Price Fluctuations


Raw Material
Change IRR (%) NPV (Rp) PBP (Years)
Price (Rp)
0.85 1,132,609,295 73.90% Rp 7,603,824,779.02 2.28314
0.9 1,199,233,372 71.43% Rp 7,323,025,844.43 2.36165
0.95 1,265,857,448 68.96% Rp 7,042,226,909.83 2.44507
1 1,332,481,524 66.50% Rp 6,761,427,975.23 2.53385
1.05 1,399,105,600 64.03% Rp 6,480,629,040.64 2.62856
1.1 1,465,729,676 61.56% Rp 6,199,830,106.04 2.72979
1.15 1,532,353,753 59.09% Rp 5,919,031,171.45 2.83824

3.6.3 Operational Cost Changes (Labor Cost Deviation)


This sensitivity analysis was performed on the change of the operational
costs of the product. One of the most important cost is the cost of the labor salary.
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
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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.

Table 3.5 Operating Labor Wage Fluctuations


Operational
Chang IRR PBP
Labor Wage NPV (Rp)
e (%) (Years)
(Rp)
0.85 894,540,000 72.34% Rp 7,426,756,822.46 2.33210
0.9 947,160,000 70.39% Rp 7,204,980,540.05 2.39610
0.95 999,780,000 68.44% Rp 6,983,204,257.64 2.46326
1 1,052,400,000 66.50% Rp 6,761,427,975.23 2.53385
1.05 1,105,020,000 64.55% Rp 6,539,651,692.83 2.60813
1.1 1,157,640,000 62.60% Rp 6,317,875,410.42 2.68639
1.15 1,210,260,000 60.65% Rp 6,096,099,128.01 2.76897

3.6.4 Fluctuation Graphics


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

3.6.4.1 Net Present Value

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Cost Sensitivity Chart Based on NPV
Rp12,000,000,000.00

Rp10,000,000,000.00

Rp8,000,000,000.00

Rp6,000,000,000.00
NPV

Rp4,000,000,000.00

Rp2,000,000,000.00

Rp-
0.85 0.9 0.95 1 1.05 1.1 1.15

Change

Product Pri ce Raw Materi al Pri ce Labor Sal a ry

Figure 3.2 Graphic of Net Present Value Fluctuation


From the graphic above, it can be seen that the influence of labor cost and
raw material but it causes changes in NPV. The increasing of product price causes
the increase of NPV, whereas the increase of raw materials and labor salary cost
causes a decline of NPV.

3.6.4.2 Internal Rate of Return

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Cost Sensitivity Chart Based on IRR
100.00%
90.00%
80.00%
70.00%
60.00%
50.00%
IRR

40.00%
30.00%
20.00%
10.00%
0.00%
0.85 0.9 0.95 1 1.05 1.1 1.15
Change

Product Pri ce Raw Materi al Pri ce La bor Sal ary

Figure 3.3 Graphic of Intermal Rate of Return Fluctuation


From the graphic above, it can be seen that the influence of operating
labors and raw materials 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 and labor cost causes a decreasing IRR.

3.6.4.3 Payback Period

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Cost Sensitivity Chart Based on PBP
4

3.5

3
Payback Period

2.5

1.5

0.5

0
0.85 0.9 0.95 1 1.05 1.1 1.15

Change

Product Pri ce Raw Materi al Pri ce Labor Sal a ry

Figure 3.4 Graphic of Payback Period Fluctuation


From the graphic above, 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 fluctuation at value about 1-4 years change of payback
period. Meanwhile, the fluctuation of raw material and labor cost cause the
fluctuation 2-3 years of payback period. The increasing of raw material cost
causes a rise of PBP while an increase of product price results in a decline of PBP.

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84

CHAPTER 4
CONCLUSION

Based on the explanation in this assignment, the company can take some
conclusions such as below:
 PT. Adi Samavin plant location will be located on Jl. Ciffest, Cikupa,
Tangerang, Banten with the facilities of electrical, water, human resources and
road access.
 There are several parts to achieve the most efficient supply chain, such as
supply chain strategy and network design, supply chain service performance,
supply chain costs, supplier performance, and also inventory management.
 All of the raw materials will be supplied more than once a week, only nano
silver and organo alcoxy silane will be supplied once three months.
 The distribution of 125 boxes ShoeCozy product will be distributed to 3
distributors in Jakarta, Bogor, Depok, Tangerang and Bekasi, with 20
bottles/box.
 Total capital investment of the company is Rp 2,564,368,149 and will be
earned from bank loan and the return will complete in 10 years.
 The company will be fully costed from bank with 9.75% interest.
 Operational cost of the company is Rp 2,685,144,928 a year.
 The minimum price for ShoeCozy product is Rp. 23,697.91, PT Adi Samavin
chooses selling price of this product will be Rp. 50,000 with marginal
advantage of 112%.
 The assumption made about the number of products sold per year: first year
products sold is 60%, second year 70%, third year 80%, and in fourth until
tenth year 90% of production capacity.
 WACC of chemical specialty product is 14.56%. This company will use
14.65% as MARR value.
 The ROI of the plant is 66.5%, the payback period is less than 4 years.
 The NPV is obtained as Rp 6,758,518,962.07. It can be concluded that this
project is profitable.

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 The increasing of product price causes the increase of NPV, whereas the
increase of raw materials and labor salary cost causes a decline of NPV.
 The increase of product price cause a bigger value of IRR while the increase
of raw materials and labor cost causes a decreasing IRR.
 This project has good feasibility and profitability because it has competitive
price benchmarked with competitor product and feasible to set high margin
price. This project can give proper profit for the investor

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