1. ECONOMIC ANALYSIS OF SUBCONTRACT DISTILLERIES BY SIMULATION MODELING METHOD
- Author
-
HARCSA Imre Milán, KOVÁCS Sándor, and NÁBRÁDI András
- Subjects
subcontract distilling ,margin calculation ,simulation modeling ,first cost ,income ,Business ,HF5001-6182 ,Finance ,HG1-9999 - Abstract
The economic analysis of the subcontract distilleries is a less-explored area of literature. At present, there are approx. 140 commercial and 500 subcontract distilleries in Hungary, in the distribution of production, the former is about 2 million, the latter producing 9 million liters of 50% vol distillate. In the study we carried out an economic analysis of subcontract pálinka distilleries by simulation modeling. Prior to our study, we defined which distillery can be considered to be average in Hungary today and this was taken into account in the marginal conditions of the investigations. Calculations were made using @Risk 7.5 software package. The special feature of margin calculation compared to commercial distilleries that they do not have their own fruit base. It has been proven that the cost of distillation can vary from 331 to 1068 HUF/litre taking into account the extreme values of 1000 simulations, and the average of self-cost is 545 HUF/litre. Based on the empirical distribution of the simulations, it can be stated that 61.1% probability is that the cost below 550 HUF margin level is expected, what is to say the distilling is profitable. Increasing production can significantly reduce the cost of distillation production by up to 30% compared to the original value but practically not, or very difficult to implement. When examining the elements of the cost factors, it was found that four determinants (cost elements and production) that have a decisive influence on the first cost. Income per liter is closely related to the first cost. According to the simulation results, it can vary between -239 and + 150 HUF/litre at 90% probability. The most significant increase in cost is the specific wage cost, and the effect of changes in energy and general costs is only six-tenths of the wage cost. It is advisable to continue making pálinka as a part-time job. By simulation modelling, setting a 1% tolerance for the difference between revenue and expense, we found 29 cases where the production volume can be considered as a brake even point. By determining the simple arithmetic mean of these cases, we can declare that the brake even quantity is 13892 liters. By setting the minimum and maximum values, we have developed a model applicable to any payroll, which can be used for cost-benefit calculations. Generally, the pálinka making can be considered as a profit generator, but the resources, location, and demand have a great influence on this income-generating capacity.
- Published
- 2020