Economic Analysis

of Diksha
Knitwears

Introduction

Diksha Knitwears Pvt. Ltd. is a Ludhiana based firm specializing in

the manufacturing of garments like shirts & t-shirts.

The firm is a contract manufacturer for various leading apparel

brands and supplies its products in various parts of the country.

Products made by Diksha Knitwears, Ludhiana

T-Shirts from Yarn

Shirts From Textile

Tools & Techniques Used

Demand Analysis

Measures of Productivity

Marginal Analysis

Demand Analysis

Demand Forecasting

It refers to the prediction of probable demand for a product or a service

on the basis of the past events and prevailing trends in the present.

It studies past data as well as present scenario and estimates the

occurrence, timing and magnitude of future events.

Demand Analysis
Demand
250000

200000

Quantity
150000

100000

50000

0
41730 41760 41791 41821 41852 41883 41913 41944 41974 42005 42036 42064 42095 42125 42156 42186 42217 42248

Demand

Demand Analysis
Seasonal Demand

This component pertains to repeatable patterns of increases or

decreases of demand depending upon time of day, week, month or
season.

The variations in demand are caused by climatic conditions (seasons),

social customs, festivals and so on.

Demand Analysis:
Seasonal Demand Forecasting
Seasonal Index Forecasting

Average Demand
Average Demand = Total Demand / No. of Periods

Period
April

Total Sales
2014
1,05,105

2015
1,73,658

May
June

90,996
84,012

92,682
1,65,936

July
August

98,413
1,37,157

82,629
1,27,332

September

1,90,077

2,36,731

Average Demand = 1,32,061

Demand Analysis:
Seasonal Demand Forecasting

Seasonal Index (SI)

SI = Actual Demand for a Season
Average Demand

Period

Average Seasonal Index (ASI) for each season

Seasonal
ASIIndex
= Sum of seasonal indices for different years
No.
of Years
2014
2015
Average

April

0.7959

1.3150

1.0554

May

0.6890

0.7018

0.6954

June

0.6362

1.2565

0.9463

July

0.7452

0.6257

0.6855

August
Septem
ber

1.0386

0.9642

1.0014

1.4393

1.7926

1.6160

Demand Analysis:
Seasonal Demand Forecasting

Demand Forecasting
Each seasons forecast = Average seasonal index for each season X Average Demand

Month
April
May
June
July
August
Septembe
r

Avg. seasonal
index
1.0554
0.6954
0.9463
0.6855
1.0014

Avg. seasonal
demand
1,32,061
1,32,061
1,32,061
1,32,061
1,32,061

Forecasted
Demand
1,39,382
91,839
1,24,974
90,521
1,32,245

1.6160

1,32,061

2,13,404

Measures of Productivity

These measures are useful for evaluating the effectiveness of a production process and
for making input decisions that maximize profits. The important measures of
productivity are:

Average Product: The average product (AP) of an input is defined as total product
divided by the quantity used of the input.

AP = O/I

Marginal Product: The marginal product (MP) of an input is the change in total
output attributable to the last unit of an input.

MP = O/I

Measures of Productivity:
Average Product
Month
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15

No. of Machines No. of Labor

450
450
450
450
450
450
450
450
450
450
450
450
450
450
450
450
450
450

299
236
241
357
499
680
438
227
168
188
488
516
485
253
492
262
459
703

Total Production
Quantity
1,10,650
1,02,900
1,08,400
1,16,500
1,41,400
1,65,900
1,12,400
85,450
75,600
96,280
1,44,300
1,38,409
1,41,702
1,22,987
1,42,365
1,54,963
1,81,540
1,90,200

Avg. Product of
Labor
369.96
435.60
449.78
325.90
283.32
243.90
256.57
376.55
449.88
512.45
295.72
268.42
292.43
485.62
289.56
590.57
395.51
270.60

Measures of Productivity:
Marginal Product
Month

Apr-14
May14
Jun-14
Jul-14
Aug14
Sep14
Oct-14
Nov14
Dec14
Jan-15
Feb-15
Mar15

No. of
Machines
450

No. of
Labor
299

Total Production
Quantity
1,10,650

Marginal Product of
Labor
-

450

236

1,02,900

123.30

450
450

241
357

1,08,400
1,16,500

1,150.33
69.55

450

499

1,41,400

175.85

450

680

1,65,900

135.28

450

438

1,12,400

220.98

450

227

85,450

127.63

450

168

75,600

167.28

450
450

188
488

96,280
1,44,300

1,042.50
160.03

450

516

1,38,409

(212.74)

Measures of Productivity
Measure of Labor Productivity
1,400.00
1,200.00
1,000.00
800.00
600.00
400.00
200.00
(200.00)
(400.00)
41730 41760 41791 41821 41852 41883 41913 41944 41974 42005 42036 42064 42095 42125 42156 42186 42217 42248

Marginal Product of Labor

Avg. Product of Labor

Marginal Analysis

Marginal analysis states that optimal managerial decisions involve comparing the
marginal (or incremental) benefits of a decision with the marginal (or incremental)
costs.

Let B(Q) denote the total benefits derived and C(Q) represent the total costs incurred,
then Net Benefits are given by
N(Q) = B(Q) - C(Q)

Marginal benefit (MB) refers to the additional benefits that arise and Marginal cost
(MC) is the additional cost incurred by using an additional unit of the managerial
control variable, then Marginal Net Benefits are given by
MNB(Q) = MB(Q) - MC(Q)

Marginal Analysis
Month

Input Cost (Rs)

Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15

1,32,22,637.00
1,04,43,698.00
1,06,55,080.00
1,58,04,197.00
2,20,64,472.00
3,00,71,253.00
1,93,67,738.00
1,00,32,605.00
74,29,303.00
83,06,308.00
2,15,72,857.00
2,27,97,093.00
2,14,22,777.00
1,11,96,555.00
2,17,36,691.00
1,16,00,691.00
2,02,92,572.00
3,10,74,242.00

Labor Cost
(Rs)
35,89,001.00
28,34,718.00
28,92,093.00
42,89,711.00
59,88,928.00
81,62,197.00
52,56,957.00
27,23,136.00
20,16,525.00
22,54,569.00
58,55,490.00
61,87,782.00
58,14,754.00
30,39,065.00
58,99,959.00
31,48,759.00
55,07,984.00
84,34,437.00

Total Costs (Rs)

(C)
1,68,11,638.00
1,32,78,416.00
1,35,47,173.00
2,00,93,908.00
2,80,53,400.00
3,82,33,450.00
2,46,24,695.00
1,27,55,741.00
94,45,828.00
1,05,60,877.00
2,74,28,347.00
2,89,84,875.00
2,72,37,531.00
1,42,35,620.00
2,76,36,650.00
1,47,49,450.00
2,58,00,556.00
3,95,08,679.00

Sales Revenue (Rs)

(B)
1,88,89,481.00
1,49,19,568.50
1,52,21,543.00
2,25,77,424.00
3,15,20,674.30
4,29,58,933.30
2,76,68,197.10
1,43,32,292.90
1,06,13,289.50
1,18,66,154.00
3,08,18,367.20
3,25,67,275.00
3,06,03,967.00
1,59,95,078.00
3,10,52,415.00
1,65,72,416.00
2,89,89,389.00
4,43,91,774.30

Net Benefits
(B)-(C)
20,77,843
16,41,153
16,74,370
24,83,516
34,67,274
47,25,483
30,43,502
15,76,552
11,67,462
13,05,277
33,90,020
35,82,400
33,66,436
17,59,458
34,15,765
18,22,966
31,88,833
48,83,095

Marginal Analysis
Month
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15

MB (B)
(39,69,912.50)
3,01,974.50
73,55,881.00
89,43,250.30
1,14,38,259.00
(1,52,90,736.20)
(1,33,35,904.20)
(37,19,003.40)
12,52,864.50
1,89,52,213.20
17,48,907.80
(19,63,308.00)
(1,46,08,889.00)
1,50,57,337.00
(1,44,79,999.00)
1,24,16,973.00
1,54,02,385.30

MC (C)
(35,33,222.00)
2,68,757.00
65,46,735.00
79,59,492.00
1,01,80,050.00
(1,36,08,755.00)
(1,18,68,954.00)
(33,09,913.00)
11,15,049.00
1,68,67,470.00
15,56,528.00
(17,47,344.00)
(1,30,01,911.00)
1,34,01,030.00
(1,28,87,200.00)
1,10,51,106.00
1,37,08,123.00

MNB (MB MC)

(4,36,690.50)
33,217.50
8,09,146.00
9,83,758.30
12,58,209.00
(16,81,981.20)
(14,66,950.20)
(4,09,090.40)
1,37,815.50
20,84,743.20
1,92,379.80
(2,15,964.00)
(16,06,978.00)
16,56,307.00
(15,92,799.00)
13,65,867.00
16,94,262.30

Marginal Analysis
Marginal Analysis
6,000,000.00
5,000,000.00
4,000,000.00
3,000,000.00
2,000,000.00

Amount

1,000,000.00
(1,000,000.00)
(2,000,000.00)
(3,000,000.00)
41760 41821 41883 41944 42005 42064 42125 42186 42248
41730 41791 41852 41913 41974 42036 42095 42156 42217

MNB
Net Benefits