Question

5) Background: You have developed a unique robotic device that will autonomously deliver groceries to people’s house. Facts: • You are limiting your delivery service to 3 miles from store location. • The cost to produce the delivery robot is $9,300 per robot with a 3 year lifecycle • Market research indicates you will need 5 robots to meet demand and account for down time (repair, charging, etc) • You expect to receive on average 75 orders per day • The average ticket price per order is $74 • It cost on average including maintenance and electricity 15 cents per mile to operate the delivery robot • Each order cost $8 in labor to pick the groceries and launch the robot • Margin for groceries is 3% Using break even analysis determine the minimum service fee per delivery you will have to charge for this service to insure you don’t lose money. Make sure you state your assumptions and show your work. I’m interested in your thought process. Feel free to submit as an excel spreadsheet if that’s easier.

Answer 1

	Calculation for minimum service fee to be charged for delivery
	Particulars	Amount ($)
	Cost of per delivery
	Labour for pickup and launch	8
	Operating cost of robotic device (Note 1)	0.9
	Depriciation of robotic device (Note 2)	0.57
	Total Delivery Cost on per order	9.47
	Less:
	Profit from sale of grocery (Note 3)	2.22
	Minimum service fee to be charged on a order	7.25
	Notes: -
	1) Operating cost of robotic device is 0.15 cents per mile. We assume every order come from 3 miles away from the store. So it will cost two way to the store i.e. for 6 miles so cost per orde will be 0.15 X 6 miles.
	2) Cost per robotic device	$9,300
	Required device	5 Pcs
	Total Cost	$46,500
	Depriciation per year (Total Cost/ Number of years)	$15,500
	Depriciation per day (Dep Per Year/ 365)	$42.47
	Depriciation per order (Dep Per day/ 75 orders)	$0.57
	3) Average value of the order	$74
	Margin is 3% for groceries	$2.22