Incremental cost analysis on substitution of whole milk powder by fresh milk in canned liquid coffee product

Abstract

At the present time, the trend of production cost of canned liquid coffee product has been increased from the increasing of duty rate of importing raw materials. With this reason, it motivated to have a study of using local raw material instead of import raw material. Moreover, it is a motivation to have more employment on agricultural industries and increasing of income. The ingredient of canned liquid coffee product has whole milk powder and this kind of milk has to import from aboard, moreover, trend of price is continuing rising. So, it activated to have a study of replacement of whole milk powder by fresh milk, which is available in country. In this thesis has a study on the possibility of fresh milk substitution in term of physical property, production volume of fresh milk in country, consuming volume in country and selling price of fresh milk in country. Moreover, it also has a study on the market of canned liquid coffee product including the study of product cost by using whole milk powder comparing by using fresh milk by incremental cost analysis. Beside that, it has a study on the technical analysis and investment cost with the existing plant in order to use fresh milk. Finally, studying on the factors, which is the most sensitive to this decision making of the investment. The result of this study, this project is viable and possible to use fresh milk replace of whole milk powder. Moreover, this project gives Payback period 2.73 months, IRR 448%. BEP 9318.43 Tons, and NPV 102.79 Million Baht. The most sensitive factor of this project study is changing raw material cost.