A large retailer has proposed to purchase 500,000 green FBW's for export at a wholesale price of $5 each, FOB shipping point with shipments spread evenly over the next 12 months. Products would not be packaged for retail (like current products) but would be shipped unpackaged in tubs provided by the buyer. No sales commissions would be paid on theses sales.

Production of these units might require the setup of a special team of employees working either on a third shift or weekends only using existing (or newly proposed equipment) production facilities. The contract is for one year initially, with renewal options at the discretion of the buyer.

Management is very concerned about keeping accurate tracking on the costs of this business. Management has requested a financial analysis of this proposal from a profit-impact perspective on a monthly basis. How would you accomplish this?

Below is what I have done already.

2,500 50.000 + 2,500 = 62,500 1.8% - Sales - returns x 67 50,000 * 54. 178,050 22,805 PT 10,000 7,500 125,000 3,500 1,500 398,355 1.7% 6.0% 0.8% 0.3% 0.3% 4.2% 0.1% 0.1% 13.4% 50,000 166,380 21,638 10,000 9,000 140,000 3,000 2.500 402,518 0.8% 0.4% 0.3% 5.0% 0.1% 0.1% 14.5% 52,500 181,611 23,410 10,000 7,500 125,000 3,500 1,500 405,021 1.7% VARIABLE 6.0% VARIABLE 0.8% VARIABLE 0.3% VARIABLE 0.2% FIXED 4.1% FIXED 0.1% FIXED 0.1% FIXED 13.4% 5% x salary 6% x salary 10% x wages $10000 x headcount Y-7500+(0*X) y=125,000+0*X) y=350040*x) y=1500+(0*X7 5, 250,000 + 12,500 - 268,500 250,000 . 51. - 12.500 5 stk 8.4% Selling Expenses: Head count Base Salaries Commissions Payroll Taxes Employee Benefits Travel Expenses Trade shows & other Marketing literature Website Total Selling Expenses: General & Administrative: Headcount Wages Payroll Taxes Employee Benefits Rent expense-Office Utilties-Office Office & Other Supplies Computer services & equipment Telephone Total G & A Expenses Other Income/Expense: Interest Income Interest Expense Other Income/Expense Totol Other Income/(Expensel Pretax Income Income Taxes Net Income Wages # of Employ 25,000 50,000 100,000 25,000 100,000 - 57 120,0001 57 20,000 690,000 0.8% 1.7% 3.4% 0.8% 3.4% 4.0% 0.7% 23.3% 250,000 25,000 50,000 100,000 20,000 80,000 100,000 25,000 650,000 9.0% 0.9% 1.8% 3.6% 0.7% 2.9% 3.6% 0.9% 23.4% 262,500 8.7% VARIABLE 26,250 0.8% VARIABLE 50,000 1.7% VARIABLE 100,000 3.3% FIXED 25,000 0.8% FIXED 105,000 57. 3.5% VARIABLE 126,000 1 57. 4.2% VARIABLE 20,000 0.7% FIXED 714,750 23.6% 5% x wages 10% x wages (26.250 $10000 x headcount fixed y=25000+(0*x) 5% supplies 5% x supplies _y=20000+0*X) 1,200 25,000 1,000 35,000 1,200 25,000 0.0% 0.8% FIXED FIXED 0.0% 0.8% 0.0% -0.8% 0.0% 1.3% 0.0% -1.2% 0.0% -0.8% 14.6% (23,800) 318,095 79,524 238,571 (34,000) 241,682 60,421 181,261 10.7% 2.7% 8.0% 8.7% 2.2% 6.5% (23,800 293,649 73,412 220,237 3.6% - 25% of 243,649 10.9% Average Price Sales: Blue Pink Returns Income statement For the Year Ended 12/31/2011 2011 Actual Results to Net Units Amount Sales 200,000x24. 2,000,000 101.3% 100,000s 2% 1,000,000 100.8% 300,000 3,000,000 101.1% 2,500 25,000 1.3% 750 7,500 32,500 1.1% 197,500 XL 4.1,975,000 100.0% 99,250 992,500 100.0% 2,967,500 100.0% 1,000,000 50.6% 500,000 50.4% 37.250 1.3% 1,537,250 51.8% Blue Pink 2011 Budget % to Net Budget Sales 1,900,000 101.1% 900,000 100.8% 2,800,000 101.0% 20,000 1.1% 7,000 0.8% 27,000 1.0% 1,880,000 100.0% 893,000 100.0% 2.773,000 100.0% 950,000 50.5% 450,000 50.4% 44,800 0.0% 1,444,800 52.1% Units 190,000 90,000 280,000 2,000 700 2.700 188,000 89,300 277,300 Units 204,000 - 102,000 306,000 2,550 765 3,315 201,450 101,235 2012 Base Budget X to Net Sales 2012 BUDGET FORMULATION: 101.3% ) Sales volume increase 100.8% by 24. 101.1% 1.3% 0.8% 1.1% 100.0% 0.8% 2012 Budget 2,040,000 1,020,000 3.060.000 25,500 7,650 33,150 2,014,500 1,012,350 3,026,850 1,059,350 530,280 Net Sales: Blue Pink Cost of Goods Sold: Blue Pink Over/(Under)-absorbed Overhead 100.0% 52.6% 52.4% 0.0% 78.9% 1.589.630 Gross Margin: 1,430,250 227 48.2% 47.9% 1,328,200 1,437,220 71.3% 2,500 50.000 + 2,500 = 62,500 1.8% - Sales - returns x 67 50,000 * 54. 178,050 22,805 PT 10,000 7,500 125,000 3,500 1,500 398,355 1.7% 6.0% 0.8% 0.3% 0.3% 4.2% 0.1% 0.1% 13.4% 50,000 166,380 21,638 10,000 9,000 140,000 3,000 2.500 402,518 0.8% 0.4% 0.3% 5.0% 0.1% 0.1% 14.5% 52,500 181,611 23,410 10,000 7,500 125,000 3,500 1,500 405,021 1.7% VARIABLE 6.0% VARIABLE 0.8% VARIABLE 0.3% VARIABLE 0.2% FIXED 4.1% FIXED 0.1% FIXED 0.1% FIXED 13.4% 5% x salary 6% x salary 10% x wages $10000 x headcount Y-7500+(0*X) y=125,000+0*X) y=350040*x) y=1500+(0*X7 5, 250,000 + 12,500 - 268,500 250,000 . 51. - 12.500 5 stk 8.4% Selling Expenses: Head count Base Salaries Commissions Payroll Taxes Employee Benefits Travel Expenses Trade shows & other Marketing literature Website Total Selling Expenses: General & Administrative: Headcount Wages Payroll Taxes Employee Benefits Rent expense-Office Utilties-Office Office & Other Supplies Computer services & equipment Telephone Total G & A Expenses Other Income/Expense: Interest Income Interest Expense Other Income/Expense Totol Other Income/(Expensel Pretax Income Income Taxes Net Income Wages # of Employ 25,000 50,000 100,000 25,000 100,000 - 57 120,0001 57 20,000 690,000 0.8% 1.7% 3.4% 0.8% 3.4% 4.0% 0.7% 23.3% 250,000 25,000 50,000 100,000 20,000 80,000 100,000 25,000 650,000 9.0% 0.9% 1.8% 3.6% 0.7% 2.9% 3.6% 0.9% 23.4% 262,500 8.7% VARIABLE 26,250 0.8% VARIABLE 50,000 1.7% VARIABLE 100,000 3.3% FIXED 25,000 0.8% FIXED 105,000 57. 3.5% VARIABLE 126,000 1 57. 4.2% VARIABLE 20,000 0.7% FIXED 714,750 23.6% 5% x wages 10% x wages (26.250 $10000 x headcount fixed y=25000+(0*x) 5% supplies 5% x supplies _y=20000+0*X) 1,200 25,000 1,000 35,000 1,200 25,000 0.0% 0.8% FIXED FIXED 0.0% 0.8% 0.0% -0.8% 0.0% 1.3% 0.0% -1.2% 0.0% -0.8% 14.6% (23,800) 318,095 79,524 238,571 (34,000) 241,682 60,421 181,261 10.7% 2.7% 8.0% 8.7% 2.2% 6.5% (23,800 293,649 73,412 220,237 3.6% - 25% of 243,649 10.9% Average Price Sales: Blue Pink Returns Income statement For the Year Ended 12/31/2011 2011 Actual Results to Net Units Amount Sales 200,000x24. 2,000,000 101.3% 100,000s 2% 1,000,000 100.8% 300,000 3,000,000 101.1% 2,500 25,000 1.3% 750 7,500 32,500 1.1% 197,500 XL 4.1,975,000 100.0% 99,250 992,500 100.0% 2,967,500 100.0% 1,000,000 50.6% 500,000 50.4% 37.250 1.3% 1,537,250 51.8% Blue Pink 2011 Budget % to Net Budget Sales 1,900,000 101.1% 900,000 100.8% 2,800,000 101.0% 20,000 1.1% 7,000 0.8% 27,000 1.0% 1,880,000 100.0% 893,000 100.0% 2.773,000 100.0% 950,000 50.5% 450,000 50.4% 44,800 0.0% 1,444,800 52.1% Units 190,000 90,000 280,000 2,000 700 2.700 188,000 89,300 277,300 Units 204,000 - 102,000 306,000 2,550 765 3,315 201,450 101,235 2012 Base Budget X to Net Sales 2012 BUDGET FORMULATION: 101.3% ) Sales volume increase 100.8% by 24. 101.1% 1.3% 0.8% 1.1% 100.0% 0.8% 2012 Budget 2,040,000 1,020,000 3.060.000 25,500 7,650 33,150 2,014,500 1,012,350 3,026,850 1,059,350 530,280 Net Sales: Blue Pink Cost of Goods Sold: Blue Pink Over/(Under)-absorbed Overhead 100.0% 52.6% 52.4% 0.0% 78.9% 1.589.630 Gross Margin: 1,430,250 227 48.2% 47.9% 1,328,200 1,437,220 71.3%