Page 86 - DMGT302_FUNDAMENTALS_OF_PROJECT_MANAGEMENT

Unit 4: Project Budgeting

Notes
University of Mumbai had received around 20,000 orders for the Aakash tablets by the end
of January 2012. In the same way, the Andhra Pradesh Government had placed an order for
10,000 tablets. The retail version of Aakash received an overwhelming response. Within
20 days, the pre launch booking had reached 2 million from individuals. Tuli said, “While
industry analysts were forecasting only 250,000 tablet computers for the Indian market in
2012, our pre-booking rate is now averaging over 100,000 individual end-user sales each
day and have cumulatively exceeded over two million.” Experts believed that the
emergence of Aakash would not only benefit India but also hold out a ray of hope to other
developing nations. Tuli said, “This is not only a concept that applies to India, but has
ignited the imagination of governments around the world.

Question
Analyse the case and discuss the case facts.
Source: http://www.icmrindia.org

4.10 Summary

A budget is an important concept in microeconomics, which uses a budget line to illustrate
the trade-offs between two or more goods.

Conceptually, the cost of project represents the total of all items of outlay associated with
a project which are supported by long-term funds.
The cost of land varies considerably from one location to another.

The cost of the buildings and civil works depends on the kinds of structures required
which, in turn, are dictated largely by the requirements of the manufacturing process
Services of foreign technicians may be required in India for setting up the project and
supervising the trial runs.

Fixed assets and machinery which are not part of the direct manufacturing process may be
referred to as miscellaneous fixed assets.

Expenses of the following types incurred till the commencement of commercial production
are referred to as pre-operative expenses.
The principal support for working capital is provided by commercial banks and trade
creditors.
There are two types of share capital equity capital and preference capital.
In general the cost of debt funds is lower than the cost of equity funds.

The selling expenses depend mainly on the nature of industry and the kind of competitive
conditions that prevail.

4.11 Keywords

Debenture Capital: Akin to promissory notes, debentures are instruments for raising debt capital.

Deferred Credit: Many a time the suppliers of the plant and machinery offer a deferred credit
facility under which payment for the purchase of the plant and machinery can be made over a
period of time.
Expected Sales: The figures of expected sales are drawn from the estimates of sales and production
prepared earlier in the financial analysis and projection exercise.

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