Returns to efficient utilization of processing capcity-Empirical evidence from micro level study.

Abstract

This paper has investigated the effect of capacity use on profitability of meat production through a case study on processing plant of NRCM. Different scenarios were worked out and were compared to find out the optimum capacity utilization. The study found that Investment of Meat processing plant is not feasible at current utilization of capacity but it will be feasible and profitable at higher capacity utilization with some additional investment. Results of the feasibility analysis revealed that, at optimum capacity of 150kg/day capacity, the plant would yield a net present value of over Rs.64 lakhs, an internal rate of return of 33% and BC ratio of 1.93 on an initial investment of Rs. 66.5 lakhs. Initial investment would be recovered in less than three years(2.42) years with average returns of Rs. 27.47 lakhs per year. Break even analysis showed that processing unit would break even at 66.47% of utilized capacity with 33.53% of margin of safety. The study has recommended for additional investment of Rs. 10.01 lakhs and increase of manpower for making the unit viable by utilizing the capacity at its optimum use. The results of this study indicated the effect of capacity on profits and viability and concluded that meat processing can be a financially viable business venture only when it is used at its best capacity.