Cost Justification

Essay by EssaySwap ContributorUniversity, Master's February 2008

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Cost Justification "Money" is one of the most critical issues in developing a business, without "money" the business will never work. There is few terms means money when it comes to business industry; terms as capital budgeting, cost allocation, job costing, is familiar to business entrepreneur. Capital budgeting is the making of long-run planning decisions for investments in projects and programs. It is a decision-making and control to that focuses primarily on projects or programs that span multiple years. This planning decision should be guided by the objectives of an organization and its strategies. Strategy describes how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its overall objectives.

In Echofresh project for Engineering Context, the group decided to produce a new range of an energy sport drink focussed to sports person, and young adult. In this case, the sound and appearance of the drink should be appealing to attract the market.

An attractive label "MC²" had been chosen to boost sales, and strict selection of design bottle using PET plastic agreed by marketing department.

As PET plastic will be used as the material, the selection of material is considered to cut down the cost to make the bottle. Although the first investment would be very high, as an injection moulding machine is a necessity to produce a bottle. Expenditure mainly focussed on injection moulding and blow moulding machine. If the company forecast the demand to be 10 million units in the first year and increasing by 20% per year, and the factory running 24 hour and 7 days a week, this means one machine has to produce 1100-1500 bottle per hour to satisfy the order quantity. Another option would be running two machines together to meet the demand.

Advantages of PET Plastic to other...