3. Selectoneproductthatyoucouldmakeyourselfandassumethatyouhave decided to start a small business producing and selling that product. You will be applying the concepts of cost-volume-profit analysis to this potential venture.

3.1. Describe your product. What market are you targeting this product for? What

price will you sell your product for? Make projection of your sales in units over

each of the upcoming five years.

3.2. Make a detailed list of all the materials needed to make this product. Include

quantities needed of each material and the cost of the material on a per-unit-

basis.

3.3. Make a list of all equipment you will need to make the product. Estimate the

cost of each piece of equipment that you will need.

3.4. Make a list of all other expenses that would be needed to create your

product. Examples of other expenses would be rent, utilities, and insurance. Estimate the cost of each of these expenses per year.

3.5. Now, classify all of the expenses you have listed as being either fixed or variable.

3.6. Calculate how many units of the product you will need to sell to breakeven for each of the five years you have projected.

3.7. Now decide how much operating income you would like to make (target profit) in each of the upcoming five years. How many units you will need to sell in each of the upcoming years to meet these target profit levels?

3.8. Based on the previous steps, how realistic is your potential venture? Do you think you would be able to breakeven in each of the projected five years? Do you think your target profit is achievable? Discuss.