Vanraj Mini Tractors

1. Calculate the breakeven sales for Vanraj Min-Tractors?
Break even is the volume of goods sold so that
Total Revenue= Fixed cost + Variable Cost (1)
Fixed Cost= Paid up Capital+ Deal Value
Fixed cost= 1.25+10
Variable cost and the total revenue depends on the number of units sold.
Let the number of units sold be x.
Selling price of each tractor= 0.19
Assuming break even in first year itself
0.19*x= (1.25+10) + (0.155*x) + (0.12/300)*x + (0.06/300)*x + (0.504+0.396+0.144+0.143+0.480)
Overhead expenses, Sales expenses, Depreciation, Interest paid, Salary and wages are considered as fixed cost for the first year as these does not vary with the number of units. We consider depreciation also as fixed cost.
Solving this gives number of units required to break even is x= 376 units
But the actual production in 1st year is just 300 units
So we suppose breakeven in the 2nd year
0.19*x= (1.25+10)+ (0.504+0.396+0.144+0.143+0.480) + (0.12+0.06)+(0.6+ 0.432+ 0.180+0.136+ 0.456)+ (x-300)(0.144+0.06)/330+ 0.155*x
Solving this gives number of units required to break even as x= 428
This number of units falls in 2nd year. 2. Evaluate the attractiveness of different market segments for Vanraj?
The four market segments for the Vanraj are small and marginal farmers, Large farmers, Industries, and horticulture farmers.
Small and marginal farmers: Agricultural land holdings is highly scattered in India. Small and marginal farmers take 82% of the total landholdings and did not own tractors. Instead they use bullocks which requires human effort too.
Now total cost of the bullock expecting a useful life span of 9 years
Purchase cost= 27500
Total fodder cost= 17500*12=2,10,000/
Total cost to maintain a pair of bullocks= 2,37,500/
Now the cost of tractor considering life to be 9 years
Purchasing cost= 1,90,000/
Fuel cost= hours