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1. Executive summary

Sebeta Bakery Enterprise is initiated by eight entrepreneur shareholders based

on the preliminary market survey and the population size/market size of

Sebeta area in May 2012. The population of Sebeta area its and surrounding

area as per the reports from the woreda estimated to 300,000 and there are 3

bakeries to serve the population. Always early in the morning and late

afternoon a number of people line up to buy bread and waiting for some time.

We conducted preliminary survey on the demand and supply side and

encouraged to take this imitative to provide quality service, create employment

opportunity for about fiften unemployed individuals and make sufficient profitout of this business. We have identified best location that is easily accessible to

the majority of Sebetaarea population.

To have advance technology for our bakery in order to increase our production

capacity and searching new market places after satisfying the local demand

that is, expand our business through opening branches in different location or

kebeles such as Tefiki, Tegi and Karakore

The government has created favorable condition for the private sector and

sustainable development of the country. These new free market environments

guarantee for package development investment opportunities for private

participation.

We have assessed source of the necessary resources and how to legalize our

enterprise. The project has required Eth. Birr 6,435,365 the initial total

investment cost out of which Birr 1,259,805 covered by share holder and the

rest Birr 5,175,560 from the bank loan. It is our belief that there is a possibility

to expand our business to Tefki,Teji and Karakore areas.

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2. Introduction

Bread is one of the basic need and it was consumed by all the community

starting from children. So it was marketable commodity which initaite to inter

into the business in addition the raw material is found near by our project

area. Our project area which is Sebeta found 25 km away from Addis Ababa.

The population of Sebeta area and its surrounding area as per the reports from

the woreda estimated to 300,000.

2.1. Company Structure

The company has simple organizational structure that can enable to carry out

its task and attain its objectives. In the structure there are three major

sections, which can establish sub-sections as required. Production &

distribution, administration and finance . The structure can be revised as

require based on the dynamic internal and external environments.

2.2. Organizational structure of Sebeta Bakery Company

Auditor

Admin & Finance

Production & Sales

Shareholders

Executive Board

Manger

Research & Development Development

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2.3. Management & Workforce

Based on the organizations structure and the policies & procedures on human

resource management & finance the decision making body is the generalassembly of the shareholders. Under the general assembly of shareholders and

executive board has been established to follow up the implementation of

policies and procedures developed by the shareholders. The manager and

departments heads are already assigned. A minimum of 15 semi-skilled and

unskilled laborers will be employed. As required there is a possibility to employ

additional working force on contractual basis.

2.4. Project objective

Sebeta bakery will produce a high quality product by considering the need of

the people. In the near future we planned have three branches in the woreda.

All this things will be done to satisfy the people by providing their choice and

get their needs nearby. Our product will be sold to the society at fair price and

with best quality.

2.5. Strategy of the Company

To have advance technology for our bakery in order to increase ourproduction capacity.

To expand our business through opening branches in different location.

Table. 1. The owner and their share

s.n Name of share

holders

Share Total

contribution

1 Weiniye Girma 157,476

2 Alemwork Eshete 157,476

3 Amsalu Geletu 157,476

4 Gashaw Ejigu 157,476

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5 Abel Girma 157,476

6 Getachew Taye 157,476

7 Anteneh Siyoum 157,476

8 Rukiya A/Mecha 157,476

Total 1,259.805

3. Market and demand analysis

Among the factors that attract our shareholder company are the population

size, the demand and the supply side for bakery products and services. As per

our preliminary survey, the supply for bread and other bakery products by the

existing bakeries is not more than 40% while the demand is increasing from

time to time. The existing bakeries being traditional businessmen are not in a

position to meet the demand for low resources capacity. The present level of

demand, amount of supply by existing firms as per data from revenue and

custom office of the woreda and demand gap is presented in a tabular form as

follows.

Table. 2. Annual consumption of Bread (loves)

Year Total demand Total supply Demand Gap

2006/07 73,350,000 11,002.500 62,347,500

2007/08 74,700,000 14,940,000 59,760,000

2008/09 76,500,000 19,125,000 57,375,000

2009/10 81,000,000 24,300,000 56,700,000

2010/11 90,000,000 36,000,000 54,000,000

On the other side the socio-economic and political environment encourages

such an endeavor and the government has created an institution Small Scale

Industries Promotion Agency and there is sufficient access of credit and

savings. Thus, our market intervention has sustainable profit making and

quality service provision that guarantee feasibility of the project.

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It concerned with two broad issues about the aggregate demand for the product

and the market share of the product for proposed project. Our analysis

supported by both primary market survey and secondary sources. The primary

data was collect by personal observation and by direct interviewing and

conducting the society. The secondary data was collected from governmental

institution mainly revenue and custom office of the woreda which is our

branches are located. The collected information gives the overall emphasis

about: market potential and demand of a community, pricing strategies, and

related impacts on the row material and their suppliers. Under our

investigation we analysis there is unsatisfied demand and available market

place in the area.

3.1.Projected demand

The project will use its 50% to 75% of its capacity for the next five years. After

this the project will use its almost full capacity (i.e. 90%) based on market

demand. Having considered all the above, demand for bread is fore casted to

grow at the rate of 5% per annum during the first four project year and then

10%, finally after 5th year onwards work its full scale, so it will increase by 25

%. Because bread is basic necessity in its nature and the increment of the

society income and urbanization development. So we projected the demand as

follows.

Table.3.Projected demand for loves of Bread

Year Projected demand for bread

2012/13 1,800,0002013/14 1,980,000

2014/15 2,160,000

2015/16 2,340,000

2016/17 2,700,000

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2017/18 3,240,000

2018/19 3,240,000

2019/20 3,240,000

2020/21 3,240,000

2021/22 3,240,000

3.2.Market planing

We have good support from the government and have established good

relationship with hotels and cafeterias in and outside Sebeta. We have also got

into commission agreement to those shops/retailers of bread. Thus, beyond the

supply and demand mis-match these are our good opportunities.

The important influencing factors identified by the company are the local,

national & global economic and market situation, wheat and maize

production/source of raw materials for the company, government policies such

as taxes and other payments and financial supplying institutions policies.

In broader sense the competition would be small to large size bread bakers and

distributors. Fortunately the competitions exist around are not big enough in

the surrounding market. There are some traders in the area of business

though the projects compete them in quality and fair price selling strategy.

Our objective mostly concerned with our findings, we set our objective to

satisfy the demand of the society by producing and selling bread at the

different place with best quality at fair price. We use one of promotional

elements, i.e. advertising (displaying public promotion). Related to this, weanalysis that our product customers are all category of the society (adults,

childrens). It is expressed as follows

3.2.1.Target segment

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Our major markets are classified in to 3. The first is the local/Sebeta home

consumption while the second is the identified hotels and cafeterias. The third

one is those shops that sale bread by purchasing it form bakeries.

3.2.2.Product Positioning

As the market is a competitive market we need to position our products and

services through gathering clients opinion and improving the products and the

services we provide in quality and quantity. And during holy days we make

public promotion by providing free special features bread.

3.2.3.Pricing and distribution

Currently, bread of different size sell for a price ranging from Birr 1.2 to Birr

4.5 each in the retail market. A suitable distribution system for bread is one,

retail on our different shops

3.2.4.Sales force

Providing training and organize experience sharing visits to relevant

institutions in the similar best experience business enterprises for our

sales experts .To do these, sufficient logistical arrangements will be organized

within the coming 6 months period.

3.2.5.Action program

we are plan to perform the following activities during and before our project

implementation and it is presented in the follwing table.

Table.4.Action program

sn

Action

year

1 2 3 4 5 6 7 8 9 10

1 Sales force 1 1 1 1 1 1 1 1 - -

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-training per

year

-Experience

sharing per

year

2 1 1 1 1

2 Advertisement

per year

4 2 1 1 1 1

3 Promotion per

year during

holiday

2 1 1 1

4 Distribution

daily

2 2 2 2 2 2 2 2 2 2

4.Technical analysis

4.1. Technology selected

A bakery house is made from a clay material in which the bakery stove is

installed. Both the house and the bakery equipment are to be made from a

fireproof material like brick and sheet material.

The following is a list of baking equipment Our machine has 6m length with an opening of 80cm by 50cm and

1.75m width and 1.8m heights.

Stove made from 2m lengths with and opening of 60cm by 45cm, widthsand 1.6cm height. Inside the metal stove, a flat clay floors can be placed.

Molding machineryIn both the clay and metal stove a place has to be though to create a chimney

for smoke. In both the clay and metal stove a heading unit can be filled. Wood

burning Electrical resistance, Kneading bowel, Harvesting tray, large boxes for

harvest the product, Oil sprayer.

Depending upon the budget and the availability of the type of stove, one can

design a stove, which can work by a use multiple methods. Bakery is a work

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that widely used by all societies and its therefore easy to learn there is no

sophisticated training is need. However a major employee will train on the

making of the bread is essentially necessary.

4.2. Material inputs and utility

4.2.1.Raw materials and auxiliary materials

Raw materials:- Flour, Yeast, Powder, Salt, and Sugar

Suppliers:- Zaki and Futtu Floor Factory, Private supper markets and

distributors.

All supplies made on regular bases, and also they found near to our production

site supply of utilities (power, water, and fuel) is reliable and we will use as

alternative kerosene, and wood, and also deep as reserve 5000- liter water in

the tanker.

Table.5. Raw materials and auxiliary materials and its cost

Sr.

No

Description unit Qty Unit price Cost in Birr

1 Flour kuntal 1800 800 1440000

2 Yeast gram/kuntal 500 43 77400

3 powder gram/kuntal 500 45 81000

4 salt kg/kuntal 1 3 5400

5 Sugar kg/kuntal 2 14 50400

Total 1645200

4.2.2. UTILITIES

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The major utilities required for the plant are water ,wood,fuel and electricity.

Water is used for washing material and mix the flour. Electric power, wood and

fuel are used as an energy source for baking bread .Water ,wood, fuel &

Electric consumption is shown below.

Table.6. Utility requirment and its cost

Sr.

No

Description unit Qty Unit price Cost in Birr

1 Electricity kWh 105,000 0.5778 60669

2 Water m3 2000 3.25 6500

3 wood m3 100 500 50000

4 fuel litter 1440 14 20160

Total 137329

4.3. Principal product

Table.7. Principal product, its share and maket serve

Product Percentage share Market

Tondi 80% Local market

Floni 10% Local market

Barly

Bread

5% Local market

Tosted 5% Local market

Table.8. Machinery and Equipment and its cost

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Description sources unit quantity Unit price Total cost

Plant

machinery

Foreign pcs 1 1500000 1500000

Electric anddiesel stove

Foreign pcs 1 100000 100000

Wood stove local pcs 1 60000 60000

Electric and

Diesel

Molding

foreign pcs 1 60000 60000

Manual

Molding

local pcs 2 7000 14000

Sales shop

equipment

-Vehicle for

out door

sales

-Shop

furniture

local pcs 2 500000 1000000

local pcs 1 10000 10000

Total

2,744000

4.4. Plant capacity

Our Machine has 80 Pattra in one round; it will produce 6000 bread per round.

(one pattra has 75 bread) and we operate two round per day. A bakery house is

made from a clay material in which the bakery stove is installed. Both the

house and the bakery equipment are to be made from a fireproof material like

brick and sheet material. The project will use its 50% to 75% of its capacity for

the next five years. After this the project will use its almost full capacity (i.e.

90%) based on market demand.

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4.5. Location and site

The project is located in Oromia region, sebeta town which is near to raw

material and reasonably for market area. The plant can be located in area

where transportation cost to deliver the product to market can be minimized

and source of supply (flour) very near to our project which is found less than

five km.

4.6. Environmental Aspect

From the nature of the product and the production process, it may be asserted

that the plant is clean and envirnmental freindly. The factory does not emmit

dust and dose not generate any intense smell. It does not discharge any

hasardiouse waste water either. Further more the smoke level created by the

plant does not make any disconfort nearby the residents. However due to the

usage of wood their may be deforstation so it need to be aforstation.

5. Financial Aspect

The finance is based on shareholders contribution and loan from the bank.

Factors influencing the financing of the business are government loan policy is

one of influential in the business environment. The company has been

established by eight powerful business entrepreneurs in may 2012 and has got

legal entity during the same period. The company founders already contributed

Birr 1,259,805 (Birr 157,476 each) additional from bank loan of 5,175,560.

5.1.Means of finance

The project is proposed to finance with equety and bank loan.

Table.9. Means of finance

Source of funds Cost

Share capital Equity 19.58%

Term loan Bank loan 80.42%

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Table.10. Annual projected cost of raw material and utility

Descri

ption

per

year

Year

1 2 3 4 5 6 7 8 9 10

Raw

materi

al

1654

200

1819

620

1984

960

2150

460

2481

300

2977

560

3152

520

3152

520

3152

520

3152

520

Utility 137329

137329

137329

137329

137329

137329

137329

137329

137329

137329

Total 1791

529

1956

949

2122

289

2287

789

2618

629

3114

889

3298

849

3298

849

3298

849

3298

849

Table.11. Annual Revenue projectiontable 12

Loan Repayment Schedule

We take Birr 5,175,560 from the bank loan and we plan to repay with in 5

years starting from the first year.And it is presented as follows

Table.13. Total production Cost Projection

Table.14.Total Admnstrative cost

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Table.15.Projected Income Stament

Table ,16.Projected Cash Flow statement

Table.17.Payback period

Initial

investment

6,435,365

ACF Commutative ACF

year-1 781,396 781,396

year-2 777,492 1,558,888

year-3 892,580 2,451,738

year-4 947,327 3,399,065

year-5 1,086,337 4,485,402

year-6 2,510,428 6,995,830

7. Risk Analysis

Sensitivity analysis

PBP 5 years,Nine months and one day

Net present value NPV 6,872,220

Internal rate of return IRR 39.72%

If investment is increased by 5% NPV is changed to (115,087). And if sales

decreased by 10% NPV is changed to (36,308,285.44). We cover our initial

investment with 5 year nine months and one day. As the net present value

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(NPV) of inflows is closer to the present value of the out flows during the life

time of the project and as IRR is 39.7% which is greater than the cost of

capital. Thus,the project is sensetive to change.

8.Implementation plan

The project implementation phase include the period from the decision to

invest to the start of commercial production and it is very important to

carefully plan and analyze this critical phase of the project cycle. In-order to

bring the factory in to successful operation, a large number of activities will

have to be care out such as project management ,project engineering,

procurement and construction and organization of plant operations.

Work schedule.

There are different activities needed to accomplish in order to start production

process. The critical activities that involved in the process are the following.

A. Budget set up.

B. Land Securing.

C. License for operation.

D. Purchase and install equipment.

E. Recruiting and classifying labor.

F. Publicized among communities and others

Table.19. Implementation Work schedule

Activity Expectation

early fishing

time in

month

Expectation

latest fishing

time in month

Average

finishing time

Sequence

activties

A 2 4 3 -

B 4 6 5 A

C 3 3 3 AB

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D 4 4 4 C

E 6 8 7 DC

F 2 3 2.5 CDE

Material Flow of Diagram

9

Purchase

Vendor

Baker

2 5

Store

1 3

General manger

6 10 4

Accountant

Cashier

8 11

12

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7

Diagram Key

Store requisition. Purchase requisition. Approval of purchase order. Approval purchase order. Purchase order. Advice for purchase made. Notice the shipment received. Invoice. Advice for invoice approval and payment.

10. Approval of payment.

11. Approval of payment.

12. Payment.

Summary and conclusion

The project predicts the establishment of a plant for the production of bread of

different type to serve and cover 40% of the gap that the demand require untile

2021. The present The plant will create employment opportunities for 15

persons. The total investment requirement is estimated at Birr 6,435,365

million, out of which Birr 2.7 million is required for plant and machinery. The

project is financially viable with an internal rate of return (FIRR) of 39.7% and

the net present value at 10% discount rate is Birr 2.58 million. The annual net

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profit of about Birr 263,840 in the first year will continuously increase and

reach about Birr 2,004,696 in year 10. The cumulative cash balance at the end

of the projected year would be about birr 10,065,699 and the pay-back period

will be within 5 years 9month and one day.

Lastly to conclude the viability of the project worthiness Sebeta bakery willaccept to run the business because the measurement Suggest that the

project is acceptable.

FNPV = 2.58 Million at 10% discount rate, which is grater than Zero FIRR = 33% which is greater than market interest rate Due to the above information conclude that the project is acceptable.

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Assumption of the project Financial Analysis The financial analysis of the Sebeta bakery project is based on the following

assumptions:-

Construction period < 1 year Source of finance 19.57%equity

80.43% loan

Bank interest 10% Taxation The business is assumed to be run as a private limited company; therefore,

tax rate is applicable on the income of a private limited company is used for

income tax calculation of the business.

Sale Tax 15% Income Tax 30% Working capital It is estimated that six month basic cost for contingency cash for initial

stages and to finance the receivables.

Six month of Salary Six month of raw material Six month of Miscellaneous Expense Six month of Utility Vehicles for Transportation The proposed setup would require two vehicles to carryout all factory and

office activities and to cater delivery requirements. The cost of vehicles is

assumed to be Birr 1 million.

Pre-Operating Costs Is assumed to cover all preliminary expenses like registration,

documentation charges, and salaries during the construction period.

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Miscellaneous Expenses Miscellaneous expenses of running the business are assumed to be various

items like office stationery, daily consumables, traveling allowances,

telephone, entertainment etc. are assumed to increase at a nominal rate of

5% per annum.

Accounts Receivables A collection period of 60 days is assumed for sales Accounts Payables A payable period of 60 days is assumed for raw material purchases

Repayment

Is assumed to begin at the end of the first year Depreciation Treatment The treatment of depreciation would be on a diminishing balance method at

the rate of

Plant & machinery 10% Land & Building Construction 5% Vehicles 20% Furniture and Fixtures 10% Office Equipment 10%

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Company StructureThe company has simple organizational structure that can enable to carry out

its task and attain its objectives. In the structure there are three major

sections, which can establish sub-sections as required. Production &

distribution, administration & finance and research & developments. The

structure can be revised as require based on the dynamic internal and external

environments.

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Organizational structure of Edget Bakery Company

Company DevelopmentThe company has been established by sixty powerful business entrepreneurs in

November 2008 and has got legal entity during the same period. The company

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founders already contributed Birr 600,000 (Birr 10,000 each) and have a plan

to sale the share to the public at large with the objective of expanding its

capital. Through Small Scale Business Cooperatives Organizations office we

have got loan from Bank and rent a house, which has sufficient premises for

our business. During the last 3 months period we are progressing as per our

plan of operation.

Mission Statement & Strategy of the CompanyOur companys mission is to provide quality service in the areas of bakery

products to our clients and gain reasonable profit out of the business. Our

strategy is to provide the require service sufficiently in Quantity and quality to

win in the competitive market and expand the business in other areas through

strengthening the research and development activities Advertising our products

and services through popular media will be used as major promotional

activities.

Products Current products

The company has planned to produce quality bread of different sizes, cookies

and Diffo dabo based on the demand. At the initial stage, we will produce more

than 100,000 loves of bread with different size for the next 6 months period.

Sixty percent will be sold in Mekanisa while the remaining will be distributed to

other parts of Addis Ababa.

Advantages/OpportunitiesThe advantages are; we have already procured modern bakery machine, which

is one of the factors for quality production. We have good support from the

government and have established good relationship with hotels and cafeterias

in and outside Mekanisa. We have also got into commission agreement to thoseshops/retailers of bread. Thus, beyond the supply and demand mis-match

these are our good opportunities.

Future products

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In the future we have the plan to sale wheat flour to the surrounding

communities and in the long run establish flour production industry as our

capital increases.

Market Classification and Description of the relevant Market

Our major markets are classified in to 3. The first is the local/Mekanisa home

consumption while the second is the identified hotels and cafeterias. The third

one is those shops that sale bread by purchasing it form bakeries.

Important influencing factorsThe important influencing factors identified by the company are the local,

national & global economic and market situation, wheat and maize

production/source of raw materials for the company, government policies such

as taxes and other payments, sale of share and availability of land to establish

flour plant and financial supplying institutions policies.

Marketing marketing strategy, sales and distribution and logistics

Our strategy is searching new market places after satisfying the local demand.

Providing training and organize experience sharing visits to relevant

institutions in the similar best experience business enterprises for our sales

experts and commission agents. To do these, sufficient logistical arrangements

will be organized within the coming 6 months period.

Positioning products and servicesAs the market is a competitive market we need to position our products and

services through gathering clients opinion and improving the products and the

services we provide in quality and quantity.

Production, research, and developmentProduction, research and development is a continues process based on

gathering public opinion and field survey

ProductionWe have the plan to produce more than 100,000 loves of bread of different

sizes per day and supply to the market. Our modern bakery machines have the

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capacity to produce even more than the number indicated above. Cookies and

other bakery products will be produced on the demand.

Research and DevelopmentThe research and development team will do its mandate using different

techniques and develop strategies that help to improve the service and at the

same time expand the business with minimum risks. Field assessment,

questioner distribution and interview of selected clients are among the

techniques to be used to attain maximum advantage over the market. The

department will be strengthened with the necessary facilities

Management & Workforce

Based on the organizations structure and the policies & procedures on human

resource management & finance the decision making body is the general

assembly of the shareholders. Under the general assembly of shareholders and

executive board has been established to follow up the implementation of

policies and procedures developed by the shareholders. The manager and

departments heads are already assigned. A minimum of 15 semi-skilled and

unskilled laborers will be employed. As required there is a possibility to employ

additional working force on contractual basis.

FinancingThe finance is based on shareholders contribution and loan from the bank, In

addition to these sales of sufficient shares will be carried out to build the

capital source on strong holds.

Factors influencing the financing of the business are government loanpolice is one of influential in the business environment.

Project objective

Sebeta bakery will produce a high quality product by considering the need ofthe people. In the near future we planned have three branches in the woreda.

All this things will be done to satisfy the people by providing their choice and

get their needs nearby. Our product will be sold to the society at fair price and

with best quality.

Specific Objective:

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To generate profit. To create job opportunity. To satisfy the need of the people by produce quality bread for the societyat fair price with best quality.

To promote the product for the society.Strategy of the Company

To have advance technology for our bakery in order to increase ourproduction capacity.

To expand our business through opening branches in different location.Project life cycle.

The effective strategic production planning is based on assumption of

characteristics of each styles of project life cycle, which lead to achieve

particular objectives and strategies as well as helpful to compute and quick

responses of its competitors. The stages of project life cycle are:-

Introduction stage, Growth stage, Maturaiton stage & Decline stage.Market and demand analysis

It concerned with two broad issues about the aggregate demand for ht product

and the market share of the product for proposed project. Our analysis

supported by both primary market survey and secondary sources. The primary

data was collect by personal observation and by direct interviewing and

conducting the society. The secondary data was collected from governmental

institution mainly city government of Addis Ababa Makanisa sub-city

administrating and from other sub city which our branches are relocated. The

collected information gives the overall emphasis about: market potential and

demand of a community, pricing strategies, and related impacts on the row

material and their suppliers. Under our investigation we analysis there isunsatisfied demand and available market place in the area. Our objective

mostly concerned with our findings, we set our objective to satisfy the demand

of the society by producing and selling bread at the same place with best

quality at fair price. We use one of promotional elements, i.e. advertising

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(displaying public promotion). Related to this, we analysis that our product

customers are all category of the society (adults, childrens).

Competitor Situation

In broader sense the competition would be small to large size bread bakers and

distributors. Fortunately the competitions exist around are not big enough in

the surrounding market. There are some traders in the area of business

though the projects compete them in quality and fair price selling strategy.

Demand Forecasting

This method involves searching the opinions of group of mangers and business

partner on expected further sales and combing them into sales estimates.

Economic Analysis

The projects primarily benefit for owners of the business who are invest their

capital it create job opportunity for some unemployed professional and daily

laborers. These opportunities will result in creation of some wealth and social

stability in and around the community which in other words stimulate the over

can growth and fair income distribution of the economy.

Technical Analysis

Material input and utility studyRaw materials:- Flour, Yeast, Powder, Salt, and Sugar

Suppliers:- K.O.J.J Floor Factory, Private supper markets and distributors.

All supplies made on regular bases, and also they found near to our production

site supply of utilities (power, water, and fuel) is reliable and we will use as

alternative kerosene, and wood, and also deep as reserve 5000- liter water in

the tanker.

The Choice of product mix Minine (with sugar of without sugar), French bread, Greslinee, Barely

break, cookies & Defo

Plant capacity and manufacturing technology selectionOur Machine has 8 Pattra in one round; it will produce 600 bread per round.

(one pattra has 75 bre ad). A bakery house is made from a clay material in

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which the bakery stove is installed. Both the house and the bakery equipment

are to be made from a fireproof material like brick and sheet material.

The following is a list of baking equipment

Our machine has 6m length with an opening of 80cm by 50cm and1.75m width and 1.8m heights.

Stove made from 2m lengths with and opening of 60cm by 45cm, widthsand 1.6cm height. Inside the metal stove, a flat clay floors can be placed.

Molding machineryIn both the clay and metal stove a place has to be though to create a chimney

for smoke. In both the clay and metal stove a heading unit can be filled.

Wood burning Electrical resistance, Kneading bowel, Harvesting tray,large boxes for harvest the product, Oil sprayer.

Depending upon the budget and the availability of the type of stove, one can

design a stove, which can work by a use multiple methods. Bakery is a work

that widely used by all societies and its therefore easy to learn there is no

sophisticated training is need. However a major employee will train on the

making of the bread is essentially necessary.

When we think about the layout of the entire bakery houses we need to include

the following:

Stove room, Product room, floor room, Additional shelfWork schedule.

There are different activities needed to accomplish in order to start production

process. The critical activities that involved in the process are the following.

Budget set up. Land Securing. License for operation. Purchase and install equipment. Recruiting and classifying labor. Publicized among communities and others.

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Activity Expectation

early

finishing time

Expectation

latest finishing

time

Average

finishing time

Sequence of

Activities

A 2 4 3 -

B 4 6 5 A

C 3 3 3 AB

D 4 4 4 C

E 6 8 7 DC

F 2 3 2.5 CDE

Material Flow of Diagram 9

2 5

1 3

6 10 4

8 11

12

7

Diagram Key

Store requisition. Purchase requisition.

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Approval of purchase order. Approval purchase order. Purchase order. Advice for purchase made. Notice the shipment received. Invoice. Advice for invoice approval and payment.10. Approval of payment.

11. Approval of payment.

12. Payment.

Financial Analysis

This analysis shows the projects operation costs, depreciation Chagres,

marketing costs, making costs, finance cost analysis, and other relevant

costs and also, the revenues, profit and loss of the projects. Most cost

analysis presented in the form of table for simplification, classification and

organizing the information. In this section we take the financial analyses on

quarter base as well as annual base.

Total InvestmentThe main analysis of project managements is financial analysis. In this

project financial analysis is covering the total investment and cost

estimation and other important analysis.

Production cost and product distribution cost estimation has been

combined to simplify the financial analysis of the project. The analysis is

based on one production center and two distribution shop centers. Inaddition to the above, the analysis is assumed that the project will use its

50% to 75% of its capacity for the next five years. After this the project will

use its almost full capacity (i.e. 90%) based on market demand.

The summary of the investment cost required for the project is estimated for

the acquisition of fixed assets and related cost, presented below:

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Table: 1

Cost of Stove and Molding Machinery

Description Unit Quantity Unit cost Total Cost

Electric and

diesel stove

Pcs

Wood stove Pcs

Electric and

Diesel

Molding

Pcs

Manual

Molding

pcs

Total

Table: 2

B. Sales Shop Equipment

Description Unit Quantity Unit cost Total cost

Vehicles for

our door

sales

Pcs 2 100,000.00 200,000.00

Shop

furniture

Pcs 1 10,000.00 10,000.00

Other Pcs 1 5,000.00 5,000.00

Total 215,000.00

Table: 32. Meanses of financing for project

The total investment requirement of the project is Birr 1380000.00 and the

main source finance is from the owners contribution and basic loan from the

bank.

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Owner (partner) contribution------------------------------------Birr

780,000.00/building and Chas

Development bank loans -----------------------------------------Birr 600,000.00

Total Birr 1380000.00

3. Working capital requirement and its financing

The brief analysis of working capital requirements is present below in the form

of table and also its detail analysis.

Description current asset

Cash

Inventory

Floor

Salt and Sugar

Yeast and powder

Total

Talbe: 4

Working capital financing

We use restricted current asset investment policy. It involves small investment

in current asset as compare to fixed asset.

We apply haggling working capital financing policy fixed asset and permanent

current asset (i.e the minimum cash balance) will financed by long term source

(Bank lone) and also Temporary current asset will financed by short term

source (owners contribution).

3. Break-even point of the project

It indicates the point that shows the project will have no loss or gain we use

sales mix production sytem, therefore, our break-even point will be:BEP(Birr)=FC WHERE:

EP*CM P=proportion of the product in sales mix.

Product E SP*P CM=contribution margin of a product

SP=unit selling price of a product.

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Product Minnin Barely bread French bread

Sales 21,500 10,500 15,750

Proportion 4 2 3

Unit selling

price

0.20 0.05 1.00

Unit variable

cost

0.17 0.17 0.17

Contribution

margin

0.03 0.33 0.83

Table: 5

Sales the forecasted annual sales value is 84,000 and 63,000 for each product

respectively so, the quarter (1st) sales unite equal to: Total sales 4.

Proportion: each product mix contribution to total quarter sale of 47,250 unit

variable cost:

Direct material = 12,300

Direct labor 2,250

FOH(variable)=10,000

Total 24,550

Sales Unit total sale (quarter)

SP

i.e 150,000 units (Minime), 21,000 units (Barely), and 15,750 units (French

bread)

Total sales unit = 141,750

Unit variable cost = total variable costTotal sales unit

Unit variable cost = 24,550

141,750

=0.17

EP*CM = (4*0.03)+(2*0.0.33)+3*0.83)

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E SP*P = (0.02*4)+(0.50*2)+(1*3)

= 0.80+1+3

=4.80

Fixed cost:

=250,000(Building)+75,000 ( sales equipment)+120,000

(machinery)+30,450(FOH)

=475,450

BEP = 475,450

-3.27

4.80

= $697,908

Annual Production Plan

It involves the projected annual revenue, manufacturing and salary expenses,

projected income statement, and also include loan repayment schedule for next

five years,

A Annual Revenue plan

Annual

Revenue Plan

Product Selling

price

Year1 Year 2 Year 3

Minine 0.40 168,000 201,600 241,920

Barely

Brad

1.00 168,000 100,800 120,960

French

Brad

2.00 126,000 151,200 181,440

Specialorder

90,000 91,000 88,000

Total 552,000 544,600 632,320 732,184

Table: 6

B. Annual Salary Expense

Table 7

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C. Annual Manufacturing expenses

Table 8

D. loan Repayment schedule

Table 9

N.B

Annual payment =principal