W13543

FLY ASH BRICK PROJECT: FEASIBILITY STUDY USING CVP
ANALYSIS
S. K. Mitra and Shubhra Hajela wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality.
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Copyright © 2013, Richard Ivey School of Business Foundation

Version: 2013-12-19

In April 2013, Rajiv Sharma had a business plan. For quite some time, he had been doing some market research exploring the potential of his “dream project” — establishing a fly ash brick manufacturing unit
— and had seen huge potential for profit in the project. His long-time friend Alok Gupta was also interested but had a few doubts regarding the feasibility of the project. Sharma, on the other hand, was sure of his plan. Years of work in the construction industry had shown him the potential of using large volumes of fly ash bricks in construction, especially in housing and infrastructure projects.

On the basis of preliminary analysis, he decided to set up a plant that would have the capacity to manufacture four million bricks per year. Though actual production would depend on market demand, the partners estimated that 2.4 million bricks could be sold per year at an average selling price of Rs7,000 1 per 1,000 bricks. He wanted to