500 kg/h Potato Chips Factory Investment Calculator

The cost of a potato chips factory cannot be calculated accurately from the production-line price alone.

A realistic investment model should include four categories:

Production equipment + Factory infrastructure + Project implementation + Working capital

Step 1: Calculate Production Volume

Assume:

Finished capacity = 500 kg/h

Operating hours = 16 h/day

Operating days = 300 days/year

Annual theoretical output:

500 × 16 × 300 = 2,400,000 kg/year

This is theoretical capacity.

A more conservative model should apply an operating efficiency factor.

If effective utilization is 85%:

2,400,000 × 85% = 2,040,000 kg/year

That figure is more useful for financial modelling.

Step 2: Calculate Raw Potato Requirement

Use:

Raw potato required = Finished product ÷ Overall yield

At 25% yield:

2,040,000 ÷ 0.25

= 8,160,000 kg potatoes/year

At 22% yield:

= 9,272,727 kg/year

This illustrates why potato yield has a major financial impact.

Step 3: Estimate CAPEX

CAPEX should include:

Production equipment

* washing;

* peeling;

* slicing;

* blanching;

* fryer;

* oil filtration;

* seasoning;

* packaging.

Factory infrastructure

* building;

* flooring;

* drainage;

* power distribution;

* gas installation;

* compressed air;

* nitrogen;

* ventilation;

* warehouse.

Project costs

* freight;

* customs;

* installation;

* commissioning;

* technician travel;

* training;

* spare parts.

Working capital

* potatoes;

* cooking oil;

* seasoning;

* film;

* cartons;

* salaries;

* receivables.

A serious financial model should not classify working capital as an optional expense.

Step 4: Calculate OPEX

A simplified production cost formula is:

Cost/kg = Potatoes + Oil + Energy + Packaging + Labor + Seasoning + Maintenance + Overhead

Example:

If raw potatoes cost P per kg and yield is Y:

Potato cost per kg finished chips = P ÷ Y

At a potato cost of $0.30/kg and 25% yield:

$0.30 ÷ 0.25 = $1.20/kg finished chips

This immediately shows how raw potato price and yield affect profitability.

Step 5: Calculate Gross Margin

If:

Selling price = S

Production cost = C

Then:

Gross margin/kg = S − C

Annual gross margin:

Annual output × Gross margin/kg

However, gross margin is not net profit.

Administrative cost, financing, depreciation, tax, sales commission and distribution must still be considered.

Step 6: Calculate Payback

A simplified formula is:

Payback period = Total initial investment ÷ Annual project cash contribution

Do not calculate payback using equipment price only.

Variables That Matter Most

The most sensitive inputs are usually:

1. potato price;
2. potato yield;
3. cooking oil consumption;
4. packaging cost;
5. utilization rate;
6. selling price;
7. energy price.

Buyers should run at least three scenarios:

Conservative / Base / Optimistic

That is far more useful than relying on one ROI number provided by a machinery supplier.