Essay about Cost Management Analysis

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Woolworths Cost Management and
Analysis report for Haymarket project
By
Hoang Bich Ngoc (ID: 11474754)
Huzefa Mehtaji (ID: 11476948)
Nhat Bui (ID: 11275803)
Zishan Hossain Choudhury (ID: 11508443)

Objectives
• Estimating revenues and costs from FY2015 to
FY2030
• Find out maximum lease amount Woolworths
Ltd should pay for the Haymarket location (r
=12%)
• Propose several energy efficient alternatives for the new store

Value chain of WOW Supermarkets
Inbound
Logistics

Operations

Outbound
Logistics

Marketing
Sales

Services

• Fuel (From warehouse to supermarket) + Salary + COGS = $30M (Fixed)
• Fuel (From producer to warehouses) + Insurance + Truck maintenance = $1M (Variable)

• Utility + Rent+ Insurance + Salary = $4M (Fixed)
• Utility + Office supplies + Wages + Maintenance = $0.3M (Variable)

• Delivery expenses = $0.2M (Fixed)
• Fuel= $ 0.02M (Variable)

• Salary = $0.2M (Fixed)
• Advertising campaign = $0.02M (Variable)

• Salary = $0.05M (Fixed)
• Wages = $0.2M (Variable)

Maximum annual lease
• The maximum amount of lease that
Woolworth could pay annual amounts AUD
2,656,568.43 per annum
Assumptions:
• Expected revenue equals 70% of normal WOW supermarket. Scenario analysis:
• Best case: NPV of $54,202,683
Expected revenue equals recent average Sale of
WOW store
• Worst case: NPV of $ -19,102,878.81
Expected revenue equals 50% recent average
Sale of WOW store

Capital Expenditure
• Investment in PPE:
– $1,779,427 millions

• Investment in Inventory:
– $3,872,172

• Renovation cost:
– $800,000

Amount of PPE with 10 year useful life
(refrigeration system, heating and cooling system, cooler room, bakery equipment...)

10

60%

Amount of PPE with 05 year useful life (air conditional system, cash counters, checkout machines...) 5

25%

Amount of PPE with 03 year useful life (store light system, shelves, showroom area...) 3

15%

Energy Efficient
Electricity cost breakdown by percentage

Alternatives

Significant costs and cost changes relating to cost of doing business (CODB)
• The electricity cost doubles in 7 years starting from FY2015
• Gas and water cost doubles in 11 years

Energy Efficient Alternatives
• Changing from huge fridges to smaller coolers near counter
• Increase shelf space from 20 inches to 25 inches • Removing the bakery section from the new
Woolworths store at Haymarket
• Using solar panel
• Use of biofuel for truck fleet

Changing from huge fridges to smaller coolers near counter
• Sale increase by 2%
• Electricity consumption reduces by 0.7%

Increase shelf space from 20 inches to
25 inches
• Decrease in inventory cost by 15%
• Increse in sales by 10%

Removing the bakery section from the new Woolworths store at Haymarket
• Salary expenses and utilities expenses to some extent can be reduced, but this alternative will only incur transportation cost as the bakery products would be brought in from other Woolworths stores.

Using solar panel
• One time cost of AUD 336,858
Show More

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