In: Statistics and Probability
Breakeven analysis
The following Cost and Sales projections were captured by the Acme’s production and Sales/Marketing teams.
Table : Projected costs
Gadget |
Factory Set-up ($/year) |
Utilities ($/year) |
Property Taxes ($/year) |
Salary - Engineers $/FTE |
Salary – Hardware technician $/FTE |
Salary – Software technician $/FTE |
Financing costs ($/year) |
A |
10,000,000 |
50,000 |
25,000 |
185,000 |
150,000 |
120,000 |
629.69 |
B |
7,500,000 |
50,000 |
25,000 |
185,000 |
150,000 |
120,000 |
473.44 |
C |
12,500,000 |
50,000 |
25,000 |
185,000 |
150,000 |
120,000 |
785.94 |
Table : Projected sales
Gadget |
Production Capacity (Units/year) |
Target Sales at 50% production Capacity (Units/year) |
Target Sales at 75% production Capacity (Units/year) |
Target Sales at 100% production Capacity (Units/year) |
MSRP |
Net Price |
A |
250,000 |
125 000 |
187,500 |
250,000 |
449 |
286.24 |
B |
150,000 |
75,000 |
112,500 |
150,000 |
499 |
318.11 |
C |
1,000,000 |
500,000 |
750,000 |
1,000,000 |
425 |
270.94 |
Run a break-even analysis using the information captured in projected costs and revenues tables and any relevant information from your production, pricing and financing analyses.
Break-even = TR = TC
Any help is much appreciated :) Confused about how to calculate total revenues. Thank you so much!
Sol:
Considering the given data and considering gaps in certain key information, have made necessary assumptions below:
Assumption on Expected Sales based for the year;
Assumption of no.of employees as the amount given below is the $/FTE rate;
Based on these assumptions, pls find below the computation of Expected total sales, expected total costs, Net Income and arriving at the total investment required for this project interms of factory setup as well as working capital requriement;
Projected Sales
Gadget | Capacity | Target Sales @ 50% | Target Sales @ 75% | Target Sales @ 100% | Expected Sales # | MSRP | Total Sales value |
A | 2,50,000 | 1,25,000 | 1,87,500 | 2,50,000 | 1,87,500 | 449 | 8,41,87,500 |
B | 1,50,000 | 75,000 | 1,12,500 | 1,50,000 | 1,12,500 | 499 | 5,61,37,500 |
C | 10,00,000 | 5,00,000 | 7,50,000 | 10,00,000 | 7,50,000 | 425 | 31,87,50,000 |
Total | 45,90,75,000 |
Assuming 1/3rd of the year with sales at 50% of Capacity, 1/3rd at 75% capacity and rest 1/3rd at 100% capcity
Projected Costs:
Gadget | Factory Set up | Utilities / year | Property Taxes / year | Salary - Engineers | Salary - Hardware technicians | Salary - Software technicians | Financing Costs |
A | 1,00,00,000 | 50,000 | 25,000 | 1,85,000 | 1,50,000 | 1,20,000 | TBD |
B | 75,00,000 | 50,000 | 25,000 | 1,85,000 | 1,50,000 | 1,20,000 | TBD |
C | 1,25,00,000 | 50,000 | 25,000 | 1,85,000 | 1,50,000 | 1,20,000 | TBD |
Information of No.of Employees is missing; Hence assumed as 100 FTEs in total;
A | B | C | D | |
Factory Set up Cost | 1,00,00,000 | 75,00,000 | 1,25,00,000 | 3,00,00,000 |
Expected Sales | 8,41,87,500 | 5,61,37,500 | 31,87,50,000 | 45,90,75,00 |
Salary Costs -Total | 4,55,00,000 | 4,55,00,000 | 4,55,00,000 | 13,65,00,000 |
Utilities | 50,000 | 50,000 | 50,000 | 150,000 |
Property Taxes | 25,000 | 25,000 | 25,000 | 75,000 |
Total Costs | 4,55,75,000 | 4,55,75,000 | 4,55,75,000 | 13,67,25,000 |
Operating Income | 3,86,12,500 | 1,05,62,500 | 27,31,75,000 | 32,23,50,000 |
Total Investment Required:
Factory Set up Cost | 1,00,00,000 | 75,00,000 | 1,25,00,000 | 3,00,00,000 |
Working Capital | 4,55,75,000 | 4,55,75,000 | 4,55,75,000 | 13,67,25,000 |
Total | 16,67,25,000 |
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