Question
Aussie Watches was founded by four friends, Andy, Bob, Carrie and Donna, who wanted to design and sell watches internationally but with a distinctive Australian
Aussie Watches was founded by four friends, Andy, Bob, Carrie and Donna, who wanted to design and sell watches internationally but with a distinctive Australian feel. They set up their business as a corporation to limit liability. They have decided to crowdfund their business with pre-orders and that way they can gauge demand before they start. They have already each invested $5,000 to design and obtain prototypes of their watches. They launched a Kickstarter page 3 weeks ago to showcase their products and take pre-orders. The Kickstarter page runs for 6 weeks and they need to have commitments of $50,000 or the fundraising is cancelled and all the committed money is returned. The commitment numbers for the first three weeks are:
Week | Cumulative total commitment |
1 | $10,000 |
2 | $17,000 |
3 | $24,000 |
The founders are concerned that they wont make the minimum commitment and the money will be returned. They have based their requirement for $50,000 as their estimated break-even point but they could adjust before the deadline if needed. They have $20,000 in development costs that they have already paid and there are no additional costs if they proceed. They are charging $450 for each watch with $200 the cost for each watch.
- What do you think they will reach in terms of commitment? Do you have any suggestions to improve these prospects? Should you adjust the commitment required? (5 marks)
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