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Economics of charcoal production


Economic aspect of charcoal making

Each charcoal producer concerns about the invested capital in the business as the main target of any businessman is the growth of the capital. Economics and cost control are the main components of the economic analysis that must be conducted in order to produce large quantities of high quality charcoal. To conduct economic analysis is important to predict the future of the company and the situation on the charcoal market. In general, economics plays a key role in the development of the enterprise.


The economic analysis of charcoal production

There are many reasons to study the charcoal industry and its economics.  Firstly, anyone who is going to produce charcoal wants to know the size of the charcoal market and the quantity of the existed charcoal on the market in order to be successful.  Secondly, it is important to know that sufficient amount of wood raw material exists and is harvested economically. The production technology and the production system, which are used by the enterprise, are the next important features that affect the effectiveness of the company.  

The method of financing, start-up and training costs, expenditure budgets for plant, infrastructure, construction, land and site preparation are the main indicators of the financial projections. The financial projection shows profit and loss of the company, sources of funds and expenditure of funds, cash flow etc. Also the economic analysis simplifies the negotiations with government institutions and financing agencies concerning water and power supply, pollution control, forest resources, project’s financing etc. Usually the complete economic analysis of the project includes such key indicators as charcoal selling price, the amount of charcoal, cost of raw materials and wood delivery, harvesting and growing costs, percentage of fines, and so on.

Charcoal Charcoal

Cost control as an important component of economics of charcoal production

Before constructing a new charcoal making enterprise, a businessman should remember that it is a difficult and high cost project nowadays. Sometimes it is easier and more successful financially to expand the activities of an existing object than to build a new one. Wherein it is better to improve and develop existed operations for making charcoal using the experience obtained by the enterprise in the past. 

So the first step in cost control is to draw up a budget where cost targets should be set up. Enterprise performance is measured by the process inventories, which should be carry out on a regular basis. It is easier to measure the effectiveness of the object using special units of measure (ton, kilometer and so on). The budget must include such figures as the amount of finished and semi-finished charcoal, charcoal deliveries and wood shipments over the budget period, the stock of raw material etc. Also, it is better if such events as equipment breakdowns, floods or very dry conditions and so on are noted in the document as well.

Source: http://ukrfuel.com/news-economics-of-charcoal-production-40.html

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