Dashboard Logistics Inc. (DLI) is looking to revolutionize the supply chain market by reducing the complexities that smaller firms experience in the supply chain process. Typically, "start-up" firms have to hire their own team for this process, or hire consultants, which can add up to a large item in the start-up's budget. Start-ups today have to spend weeks researching multiple companies to find every aspect of their supply chain: freight, storage, quality control, and getting to the end customer. Many companies will not know their exact price for all of this until orders are actually sent out. DLI, a Northeastern University IDEA venture, has taken the hassle out of this process by finding all this information for a start-up based upon DLI's creation of a beta version of an online calculator (using proprietary algorithms) and an associated web-based dashboard. Companies will be able to find all of this information in one place and be able to know their supply chain costs beforehand. Start-ups will then be able to manage their costs and cycle times more efficiently. Currently, DLI gains customers through direct sales. They estimate that it takes approximately 16 hours of sales effort and the associated time to "on board" a customer. DLI is targeting a narrow niche of customers characterized as having pre-packaged physical products that require no additional preparation. They plan to attract customers who want to know exactly when and what they are going to pay. DLI plans to grow with these customers handling their fulfillment as the customer expands. As DLI grows, it will then plan to take on medium sized companies who want to upgrade their supply chain process. There are approximately 8,000 startups in the US today in which DLI can target. Based on the company's calculations, this is approximately $30 million in potential revenue. Secondary research indicates that the average startup company starts by shipping 3,000 orders/month and grows to 5,000 orders/month after one year. DLI has three main competitors, Boatline which has their services online, but requires customers to know both the location of their warehouse and how best to ship their products to the warehouse. Choosing a warehouse can be one of the most costly factors in logistics. SCommerce includes the entire logistics process, but focuses mainly on e-commerce. Their third customer, Jungle, prefers only large customers. It is November and DLI is seeking a $10,000 grant from IDEA's Funding Board to grow their company. DLI plans to use part of the funds to hire a designer to improve the user experience. The improved user experience on the website will facilitate the process of gaining customers. Currently, "on-boarding" customers takes a longer time because it is necessary to walk customers through their dashboard. With less time spent on this process, DLI can focus its time on gaining more customers. They also plan to use some of the funds to hire a programmer to develop a sales tool to help DLI reach thousands of businesses that go through company incubators and venture capital firms. DLI also plans to use some of its sales efforts to start strategic partnerships with company incubators to become preferred vendors and be able to reach more startups. Ideally, DLI plans to be relevant to physical product companies at every stage of the supply chain. After DLI has built up their user interface and has on-boarded 10 paying customers, they plan to target popular newspapers, magazines and social media platforms to write content about the innovative nature of DLI's business model. As part of the funding process, DLI has developed projected sales and expense forecasts, with and without funding. These are displayed in Tables 1 and 2. As part of the stage gate process, DLI has a meeting with the IDEA Board relative to their funding request, strategy and projected business plan. In preparation for the meeting, the DLI team - largely current or recently graduated software engineer majors at Northeastern University -has asked for your help. As a student in DMSB and someone who has successfully completed the managerial accounting course, they know that you can help them prepare for their meeting. You think that this is a great opportunity for you to put your managerial accounting skills to work in an advisory role for these entrepreneurs. Knowing the power of managerial accounting data, you anticipate the following questions to be asked. You should prepare cogent answers to these questions, draw relevant insights and provide any supporting exhibits and/or graphs that you believe will illuminate your analysis. You should use Excel for your analyses. In your advisory role, you need to prepare DLI to pitch their idea for funding. 2. In what specific ways - financially - would the grant funding help DLI? How would this be expressed quantitatively? What further questions might you want to ask of this venture (and is there any other types of data that you think would be useful?) 10 points 3. Classify the costs by behavior using number of transactions (customer orders) as the activity. Be sure to provide both quantitative and qualitative support when applicable. Does there seem to be an opportunity to substitute fixed for variable costs (or vice versa)? If the selling price were cut to boost unit sales, how would that effect costs (if at all in this case)? 15 points 4. Prepare a contribution margin income statement by month with and without the funding. Comment on DLI's cost structure. 15 points 5. Calculate DLI's breakeven point. How does breakeven with and without the grant financing compare? Show your calculations in detail and provide any assumptions and/or approaches that you took to frame an answer to this potential question posed by the Board. 20 points 6. How would you put forth a summary response to the Board's question as to whether there would be a good (rate of ) return on the IDEA grant of $10,000 given the projections available? 5 points Assume grant funding for these questions 7. Which forecasts will the Board be most concerned about accuracy and/or not meeting the projections? Why? How should DLI respond to alleviate some of the Board's concerns? 5 points 8. Prepare a sensitivity analysis (+/- 10%) around the average transactions per customer for the Q1 forecasts (present as a contribution margin income statement). What can you conclude from the sensitivity analysis? 10 points 9. You believe that the Board will challenge DLI's marketing efforts. The Board will want DLI to double its marketing efforts in Q4. DLI believes that this could increase *Transactions are orders placed by each customer with DLI. \begin{tabular}{|c|c|c|c|c|c|c|c|c|c|c|c|c|c|} \hline Table 2 & & & & & & & & & & & & & \\ \hline \multicolumn{14}{|l|}{ DASHBOARD LOGISTICS INC (DLI) } \\ \hline \multicolumn{14}{|l|}{ Pro Forma Profit and Loss } \\ \hline & January & February & March & April & May & June & July & August & September & October & November & December & Total \\ \hline Sales & $110 & $750 & $7,500 & $14,875 & $27,000 & $36,300 & $45,500 & $60,000 & $76,500 & $89,300 & $100,800 & $115,000 & $573,635 \\ \hline \multicolumn{14}{|l|}{ Operating Expenses } \\ \hline \multicolumn{14}{|l|}{ Executive, Sales, \& Misc. Expenses } \\ \hline Executive Payroll & $2,000 & $2,000 & $2,000 & $4,000 & $6,000 & $8,000 & $8,000 & $10,000 & $12,000 & $12,000 & $12,000 & $5,000 & $83,000 \\ \hline Marketing & $0 & $0 & $0 & $0 & $0 & $0 & $0 & $0 & $6,000 & $6,000 & $6,000 & $6,000 & $24,000 \\ \hline Sales & $110 & $150 & $1,000 & $1,750 & $2,700 & $3,630 & $4,550 & $6,000 & $7,650 & $8,930 & $10,080 & $11,500 & $58,050 \\ \hline Servers/Hosting & $18 & $20 & $45 & $68 & $96 & $124 & $152 & $195 & $245 & $283 & $317 & $360 & $1,922 \\ \hline Travel Expenses & $0 & $0 & $500 & $500 & $500 & $500 & $500 & $500 & $1,500 & $1,500 & $1,500 & $1,500 & $9,000 \\ \hline Total Executive Expenses & $2,129 & $2,170 & $3,545 & $6,318 & $9,296 & $12,254 & $18,202 & $26,695 & $37,395 & $38,713 & $39,897 & $34,360 & $230,972 \\ \hline \multicolumn{14}{|l|}{ Accounting \& Legal Expenses } \\ \hline Accounting \& Legal Payroll & $0 & $0 & $0 & $200 & $0 & $0 & $200 & $0 & $0 & $200 & $0 & $0 & $600 \\ \hline Rent & $2,200 & $2,200 & $2,200 & $4,000 & $4,000 & $4,000 & $4,000 & $4,000 & $7,500 & $7,500 & $7,500 & $9,000 & $58,100 \\ \hline Total Operating Expenses & $4,329 & $4,370 & $5,745 & $10,518 & $13,296 & $16,254 & $22,402 & $30,695 & $44,895 & $46,413 & $47,397 & $43,360 & $289,672 \\ \hline Profit Before Interest and Taxes & ($4,218) & ($3,620) & $1,755 & $4,358 & $13,704 & $20,046 & $23,099 & $29,305 & $31,606 & $42,887 & $53,403 & $71,640 & $283,963 \\ \hline & & & & & & & & & & & & & \\ \hline & & & & & & & & & & & & & \\ \hline & & & & & & & & & & & & & \\ \hline & & & & & & & & & & & & & \\ \hline & & & & & & & & & & & & & \\ \hline & & & & & & & & & & & & & \\ \hline \end{tabular}