Question

In: Accounting

Breakeven analysis The following Cost and Sales projections were captured by the Acme’s production and Sales/Marketing...

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

TBD

B

7,500,000

50,000

25,000

185,000

150,000

120,000

TBD

C

12,500,000

50,000

25,000

185,000

150,000

120,000

TBD

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

TBD

B

150,000

75,000

112,500

150,000

499

TBD

C

1,000,000

500,000

750,000

1,000,000

425

TBD

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.

Solutions

Expert Solution

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 Total
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    45,90,75,000
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            1,50,000
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
   16,67,25,000

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