FACULTY OF MECHANICAL AND MANUFACTURING ENGINEERING

BDA40902 ENGINEERING ECONOMY

GROUP ASSIGNMENT (TASK 1)

SEMESTER 1, 2021/2022

BUSINESS PROPOSAL & PRODUCT COST-PROFIT ANALYSIS

SECTION : 12

GROUP : 13

LECTURER : DR. HASLINA BINTI ABDULLAH

GROUP MEMBERS

NO. NAME MATRIC NO.

1. MUHAMMAD AFNAN BIN CHE MAZLAN CD200117

2. MUHAMMAD HADIF BIN MOHD ARIS CD200208

3. MUHAMMAD NIZAM BIN KHAMIS CD200232

4. NUR IFFA INSYIRAH BINTI KHAIRUZAMAN CD200056

5. SITI NUR HIDAYAH BINTI ABD RAZAK CD200224

i
 TABLE OF CONTENT
CHAPTER 1 INTRODUCTION 1
1.1 Introduction to Engineering Economy 1
1.2 Group and Company Background 2
1.3 Objective 2
1.4 Organization of Group 3
CHAPTER 2 BUSINESS PROPOSAL 4
2.1 Description of the Business 4
2.1.1 Competitive Advantage 4
2.2 Material Requirement and Process 4
2.2.1 Material Requirement 4
2.2.2 Product Requirement 6
2.2.2 Manufacturing Process 6
2.3 Identification and procurement machinery 8
2.3.1 Type of DTG Machine 9
2.4 Machine Ownership Cost, Operation and Maintenance Cost 10
2.4.1 Machine Ownership Cost 10
2.4.2 Operation and Maintenance Cost 11
CHAPTER 3 PRODUCT COST AND PROFIT ANALYSIS 12
3.1 Estimation of Total Cost 12
3.2 Determination of Sale Price, Break-Even and Profit Margin Analysis 13
3.2.1 Sale Price 13
3.2.2 Break Even 13
3.2.3 Profit Margin Analysis 14
CHAPTER 4 SCOPE OF WORK 15
4.1 Work Breakdown Structure (WBS) 15
4.2 Gantt Chart 16
APPENDICES APPENDIX 1 17
APPENDIX 2 19

ii
 CHAPTER 1
INTRODUCTION

1.1 Introduction to Engineering Economy

Individuals in everyday life make decisions on a regular basis to choose one option over
another. The majority of decisions include money, which is referred to as capital or capital funds
and is usually limited in quantity. The key purpose of deciding where and how to invest these
restricted resources is to add value as the selected alternative's future, anticipated results are
achieved. The factors that influence a decision are frequently a mix of economic and
noneconomic ones. Engineering economics is concerned with economic concerns.

Engineering economics formulas and procedures are applicable to all forms of money
concerns, making them equally beneficial in business and government, as well as for individuals.
As a result, this course may potentially provide us with an economic analytical tool for making
personal decisions such as car purchases, house purchases, significant credit purchases, furniture,
appliances, and gadgets, in addition to applications to projects in our future work.

Referring to the assignment task 1 that has been assigned, few criteria have been provided for
us to initialize a new business. In order to achieve the requirements, few criteria have been set to
ensure we are able to determine the service cost and profit analysis for the T-shirt printing
services.

1
1.2 Group and Company Background

"Cool Cloth Printing” is the name of a private limited company that aims to provide
economical design and printing services. Chairman, General Manager, Operation Manager, Store
Manager, and Marketing Manager are the five partners who run the company. This company was
founded in March 2022 and is headquartered in Batu Pahat, Johor. The company was established
to address the demands of the general population, particularly those who did not know how to
create their own t-shirt. We offer this service to make work easier for everyone, including those
who want to establish their own business.

Our services mostly consist of delivering orders to customers. The majority of our customers
prefer cash on delivery because it is more convenient for them. Customers can also purchase
directly from us by walking into the store where we have provided them with the t-shirt.

Figure 1.1: Company Logo

1.3 Objective

 To provide economical design and printing services

 To make work easier for everyone
 To help those who want to establish their own t-shirt business

2
1.4 Organization of Group

This group consists of 5 partners. In order to achieve our purpose, this group has connection
and interdependence among all members, whether physically or online meeting and discussions.
Then, our group has a set structure that establishes a bond that keeps members of the group
together and allows us to function as a unit.

Each member of the group has a certain function. The group's success is influenced by our
skill and willingness to fulfil the requirements of that function. Roles are either formally or
informally assigned. Members may play many roles at the same time. It also defines each
member's roles and responsibilities, which is critical for the task's completion.

Chart 1.1: Organizational Chart

3
 CHAPTER 2

BUSINESS PROPOSAL

2.1 Description of the Business

A T-shirt is a single piece of clothing that is universal and has remained timeless. It will
never go out of style, whether it is a graphic, a plain oversized throw or even a body-hugging
jersey. Our team agreed that T-shirt is the most suitable types of garments in our business, thus
we decided to use this as our product for marketing and profit purpose. There are many
selections of T-shirt available in the market today. However, it does not fulfill what does young
people want in terms of design and style. That why we intend to create T-Shirt that are
distinguished from other kind of T-shirt in terms of style and design.

2.1.1 Competitive Advantage

The advantage of making T-shirt Company is that it’s easy to run and has low set up
cost compared with other business. For instance, it just needs to use computer as a media of
transforming the design ideas into production. Besides that, our competitive advantage is
creative and provocative design in our T-Shirt.

2.2 Material Requirement and Process

2.2.1 Material Requirement

a) Blank White T-shirt

4
 A T-shirt, or tee shirt, is a style of fabric shirt named after the T shape of its body
and sleeves. Traditionally, it has short sleeves and a round neckline, known as a crew
neck, which lacks a collar. T-shirts are generally made of a stretchy, light, and
inexpensive fabric and are easy to clean. T-shirts are inexpensive to produce and are
often part of fast fashion, leading to outsized sales of T-shirts compared to other attire.
Production processes vary but can be environmentally intensive, and include the
environmental impact caused by their materials, such as cotton which is both pesticide
and water intensive.

b) T-shirt printing Ink

A custom success t-shirt printing Ink is determined by a number of factors: it must

be appealing, be durable, and have the perfect design. Its critical to choose the correct
printing ink when it comes to getting the design just perfect. The entire design will break
apart if you do not use the correct sort of T-shirt printing Ink. The type of ink used in
screen printing, one of the most common printing processes, is important since each has
its own set of advantages and disadvantages.

RAW MATERIAL PRICE/UNIT QUANTITY PRICE/MONTH

T-Shirt White Cotton RM 10.00 7280 RM 78200

Ink Printer
- Red
- Yellow RM 50.00 1820 RM 91000
- Blue
- Black

Table 2.1: List of Raw Material

5
2.2.2 Product Requirement

These are the product needed to run our company. The product list for our service t-
shirt printing. The table shows the product description and price

Price Quantity Total

DTG Printing Machines RM 8241.00 per unit 2 RM 16482.00
Ink Printer RM 50.00 per unit 1820 RM 91000.00
T-Shirt White Cotton RM 10.00 per unit 7280 RM 72800.00
Steam Iron RM 800.00 4 RM 3200.00
RM 183482.00

Table 2.2: Estimation Cost Price

2.2.3 Manufacturing Process

Manufacturing is an integral and huge part of the economy. It involves the processing
and refinement of raw materials. Converting these raw materials into something more useful
adds value. This added value increases the price of finished products, making manufacturing
a very profitable part of the business chain.

Steps for Printing with Direct-to-garment printing (DTG)

Creating a finished product using a t shirt printing machine and printing on a white t-
shirt or other white textile requires little preparation of the garment in advance but with DTG
Printers it have the highly profitable capability of printing directly onto dark garments as well
and that requires “pretreating”.

a) Preparing the T-Shirt

- Use a spray gun and make sure all areas in which ink will be laid down are
covered in order to avoid misprints.

6
b) Heating
- The garment for 5-10sec to help humidity evaporate and to flat out the fibers.

c) Place the T-Shirt on DTG Printer

- Load the T-Shirt onto the printer. Make sure using the relative platen and adjust it
properly. The right positioning is crucial in order to get the desired output and not
waste any textile.

d) Creating Your Graphics

- With direct to T-Shirt printing the work generally begins at the computer. All
DTG need good, clean artwork to produce the best prints on the T-Shirt. Good
artwork starts with professional quality graphics software like CorelDRAW,
Photoshop or Adobe Illustrator.

e) Printing on a DTG Printer

- Direct T-Shirt printers generally require a specialized software package called a
Raster Image Processor (RIP) to print properly. DTG printer will come with a RIP
configured with the most common settings for the printer and DTG training class
will go over the process of creating specific print settings for the application that
is needed. This process is taking about 5 - 8 minutes in completing the printing.

f) Ink curing process

- Once the printer is done printing the T-Shirt, it will need to cure the T-Shirt to set
the inks to insure maximum wash ability. Typical cure times range from 2-3
minutes at 170 celcius, some T-Shirt may allow to cure at slightly higher
temperatures for shorter periods of time.

7
 Chart 2.1: Manufacturing Chart Process

2.3 Identification of Procurement Machinery

In this project, several machines are required to be repaired every month. The availability of
this machine will facilitate and launch this project. The table below shows the function and the
maintenance about the machine.

Machine Function Maintenance

 To print out the  Clean the

t-shirt after the machine around it
shirt has been if there is dirty.
prepared.  Place the machine
in room
temperature after
used.

 To iron the t-  Clean the iron

shirt before it is around the

8
 in the packaging machine.
 Change the cloth
on the iron
machine after
used.

Table 2.3: Function and Maintenance of Machine

2.3.1 Type of DTG Machine

Direct to Garment printing is a perfect example of how the computer revolution has
affected the printing industry.  The DTG printer uses sophisticated computer aided
technology to spray tiny droplets of ink onto garments. Direct to Garment printing
process involves computer aided application (spraying) of aqueous water-based textile
inks onto a garment. The ink is absorbed by the garment fibres and will need time to cure.
DTG printing works well with the cotton fibres that are commonly found in both t-shirts
and polos. The ink is sprayed onto the garment through small inkjet nozzles, the spraying
pattern and colour is guided by a computer program. The ink is absorbed by the garment

9
 fibres and is allowed to dry. DTG printing works well with the cotton fibres that are
commonly found in both t shirts and polos. In many cases a cotton t shirt is pre-treated to
allow for the accurate absorption of ink.

2.4 Machine Ownership Cost, Operation and Maintenance Cost

2.4.1 Machine Ownership Cost

The depreciation expense on things or buildings that are generally seen as permanent
costs or fixed expenses is included in the overall machinery cost. Table shows the total cost
for machine ownership cost of our company.

Quantity Price/Unit Total Cost

DTG Printing
2 RM 8241.00 RM 16482.00
Machines
Laptop 1 RM 2500.00 RM 2500.00
Steam Iron 4 RM 800.00 RM 3200.00

Cashier Machine 1 RM 450.00 RM 450.00

CorelDRAW 1 RM 2352.00 RM 2352.00

Working Table 2 RM 150.00 RM 300.00

Office Chair 5 RM 135.00 RM 675.00
Front Desk Counter 1 RM 350.00 RM 350.00
Storage Rack 5 RM 250.00 RM 1250.00
TOTAL RM 27559.00

Table 2.4 Machine Ownership Cost

2.4.2 Operation and Maintenance Cost

10
 Operation cost is the money it takes to run our company. These are the ongoing costs of
running a firm, such as keeping the lights on and employing personnel to sell and meet
customer demands.

Maintenance costs are the costs incurred to keep an item in good condition or good
working order. When purchasing an item that requires upkeep, consumers should consider
the initial price tag as well as the item’s on-going maintenance expenses.

Price per Month Quantity Total

Employee’s Wage RM 1500.00 5 RM 7500.00
Maintenance RM 2000.00 - RM 2000.00
Electricity RM 1500.00 - RM 1500.00
Water Bills RM 1000.00 - RM 1000.00
Marketing RM 1500.00 - RM 1500.00
RM 13500.00

Table 2.4: Operation and Maintenance Cost

11
 CHAPTER 3

PRODUCT COST AND PROFIT ANALYSIS

3.1 Estimation of Total Cost

Total cost is the sum of the fixed costs (FC) and variable costs (VC) within the range of the
quantity to prepare the service. Table 3.1 below shows the total cost that needed to our T-shirt
printing service.

FIXED COST VARIABLE COST

DESCRIPTION PRICE DESCRIPTION PRICE
Machine ownership 27559 Raw Material 163800
Maintenance 24000 Utilities 1250
Rent 30000 Marketing 1500
Employees 138000
TOTAL 189559 / year TOTAL 166550 / month

Table 3.1: Fixed cost and Variable Cost

The total price for variable cost for printing t-shirt have been sum up for 1000 pieces of shirt.
This is due to the prices of the items has been followed from the retail shop. To obtain the values
per person, the total price for variable cost of material should be divided by 1000 pieces. The
total price for variable cost per person is:

RM 166550
=RM 166.55 / pieces
1000 pieces

To calculate the total cost, we can use the formula of TC:

TC =FC +VC (Q)

Where;
TC – Total Cost
FC – Fixed Cost
VC – Variable cost
Q - Quantity 12
 As we assumed Q = 1000 pieces, the total cost as below;

TC =FC +VC ( Q )

TC =RM 189559+ ( RMmonth ×

year )
166.55 12 month
( 1000 )

TC=RM 2,188,159 / year

3.2 Determination of Sale Price, Break-Even and Profit Margin Analysis

3.2.1 Sale Price

To prevent from any losses that will happen towards the company, the price needs to be
calculated. By taking Q = 1000, and using the Total Revenue (TR) = Total Cost (TC);

Total Revenue=Total Cost

Price × Quantity=Fc+VC ( Q )

Price (1000 )=RM 189,559+ ( 166.55 ×12 month ) (1000)

Price=RM 2188.16 / year

Price=RM 182.35 / month

Price=RM 6.08 / day

From the calculation obtained, the minimum price per day is RM6.08

3.2.2 Break Even

To calculate the break-even, we have set our price into RM25/day for one piece which
equal to RM9125/year. The formula for break-even sale as shown below;

BEP :TR=TC

13
 P ×Q=FC + VC (Q)

9125 ×Q=RM 189,559+ ( 166.55× 12 month ) (Q)

7126.40 Q=RM 189,559

Q=26.60units / year ≈ 27 units/year

3.2.3 Profit Margin Analysis

Next step is to calculate the profit to verify that the service has been provided by the
company gaining profit. By putting the quantity to 500 units, the profit will be as shown
below;

Profit=Total Revenue ( TR )−Total Cost ( TC )

Profit=( RM 9125 )( 500 )− (166.55 ×12 month ) (500)

Profit=RM 3,563,200

As we know, to know whether it is profit or loss, the value for total revenue must be
more than total cost. After calculating the profit, the profit margin also needs to be
calculated to ensure how much the percentage of profit margin that able to achieve in a
year.

Gross profit
Profit margin= ×100 %
Total Revenue

3563200
¿ × 100 %
4562500

¿ 78.10 %

14
 CHAPTER 4

SCOPE OF WORK

4.1 Work Breakdown Structure (WBS)

The group leader allocated tasks beginning of the project to ensure that it
was completed before the deadline. This procedure is carried out once all
members of the group have been discussed. The list of Work Breakdown
Structures (WBS) is shown in Table 4.1.

No. Content Person in

Charge
1.0 INTRODUCTION

1.1 Introduction to Engineering Economy Iffa

1.2 Group and Company Background Iffa
1.3 Objective Iffa
1.4 Organization of Group Iffa
2.0 BUSINESS PROPOSAL
2.1 Description of Business Afnan
2.2 Material Requirement and Process Afnan
2.3 Identification of Procurement Machinery Hadif
2.4 Machine Ownership Cost, Operation and Maintenance Hadif
Cost
3.0 PRODUCT COST AND PROFIT ANALYSIS

3.1 Estimation of Total Cost Hidayah

3.2 Determination of Sale Price, Break-Even and Profit Margin Nizam
Analysis
5.0 SCOPE OF WORK
5.1 Work Breakdown Structure (WBS) Iffa

15
 5.2 Gantt Chart Iffa

Table 4.1: List of Work Breakdown Structure

4.2 Gantt Chart

No. Task Weeks

1 2 3 4 5 6 7 8
1. Assignment task 1 received

2. Group formation

3. Brainstorming Ideas

4. Gather and shortlisted best Ideas

5. Title and Ideas approval by lecturer

6. Gather fix and variable cost

7. Provide data related with business

proposal
8. Discussion

9. Task distributed among members

10. Business proposal discussion

11. Product cost and profit analysis

discussion
12. Submission of task 1
Remark:

16 Plan
 Actual

APPENDICES

APPENDIX 1

MINUTE MEETING 1

Purpose : Report and title discussion

Date : 07 April 2022
Time : 9:00pm – 10:00pm
Medium : WhatsApp
Attendances :

1. MUHAMMAD AFNAN BIN CHE MAZLAN

2. MUHAMMAD HADIF BIN MOHD ARIS
3. MUHAMMAD NIZAM BIN KHAMIS
4. NUR IFFA INSYIRAH BINTI KHAIRUZAMAN
5. SITI NUR HIDAYAH BINTI ABD RAZAK

ITEMS MATTER DISCUSSED ACTION BY

1. Understand the task requirement All members

2. Discuss and gather all informations All members

3. Discussion ended at 10:00pm. All members

17
Prepared by:

NUR IFFA INSYIRAH BINTI KHAIRUZAMAN

18
MINUTE MEETING 2

Purpose : Division of task

Date : 03 May 2022
Time : 12:00pm – 1:00pm
Medium : WhatsApp
Attendances :

1. MUHAMMAD AFNAN BIN CHE MAZLAN

2. MUHAMMAD HADIF BIN MOHD ARIS
3. MUHAMMAD NIZAM BIN KHAMIS
4. NUR IFFA INSYIRAH BINTI KHAIRUZAMAN
5. SITI NUR HIDAYAH BINTI ABD RAZAK

ITEMS MATTER DISCUSSED ACTION BY

1. Discussion on the preparation of the report All members

2. Divided the task of the report among the group member All members

3. Discussion ended at 1:00pm. All members

Prepared by:

NUR IFFA INSYIRAH BINTI KHAIRUZAMAN

19
APPENDIX 2

20