Question

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.

Answer 1

Based on the information given, i have made the following assumptions

1. The assumption on Expected Sales based for one year

2. Assumption of number of employees as the amount given below is $ / FTE rate

Based on the given information and above assumptions, please find the below computation of Expected Total sales, Expected Total Costs, Net Income and Total Investment required for the project of the factory setup as well as a working capital requirement :

Statement showing the calculation of 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 1/3 rd of the year with sales at 50% of Capacity, 1/3rd at 75% capacity and rest at 100% capacity.

Statement showing the calculation of 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

Note: Information of No.of Employees is missing, Hense assumed as 100 FTE's in total.

Statement showing the calculation of Net Operating Income

	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	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

Statement showing the calculation of 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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