Doc Brown Enterprises

You work in the finance department of Doc Brown Enterprises. Doc Brown has asked you to review some information for a new product for the company. He has asked you to determine some breakeven information, develop a forecast for future sales with the product, and discuss some working capital management issues related to the project.

PART 1 - Doc Brown Enterprises manufactures time displacement kits. Recently Doc Brown Enterprises developed a new time machine. Information regarding the manufacturing process product is below. (30 points)

- The planned retail is $220.00. - Raw Materials for one time machine are $90.00. - Assembly time is expected to be 90 minutes per unit. - Production labor is paid at $12.00 per hour. - Operating expenses are as follows:

o Salaries - $3,400 per week o Insurance - $900 per quarter o Rent - $1,800 per month o Utilities - $1,000 per month

Based on the above information do the following: 1. Create a break even table of the given data. 2. What is the contribution margin for each time machine sold? 3. Determine how many time machines must be sold per month to break even. Show your math. 4. Determine break even dollars. Show your math. 5. The company would like to make a $30,000 monthly profit on the sale of time machines. How many time machines need to be sold for that to happen? What are the dollar sales representing this? 6. How many employees need to be hired to accomplish this (assume 8 hours X 5 days)?

PART II. Doc Brown Enterprises had the following sales figures for the past year. He would like you to forecast his sales based on the weighted average and the linear regression, and decide which method is best. (40 points)

Time Period Actual Sales Dollars

1. 1 $1,425,000

2. 2 $1,458,000

3. 3 $1,505,000

4. 4 $1,640,000

5. 5 $1,550,000

6. 6 $1,580,000

7. 7 $1,612,000

8. 8 $1,628,000

9. 9 $1,670,000

10. 10 $1,705,000

11. 11 $1,730,000

12. 12 $1,735,000

Using Excel recreate this spreadsheet and then do the following:

1. Create two new columns and calculate and compare a 3 month

   moving average and a weighted average forecast for months 4

   through 12, using the weights 3, 5, and 8.

2. Create two new columns showing the A-F of each method

3. Determine the MAD for each forecast and note which is more

   accurate.

4. Using the Linear Regression forecast months 13-24. This is the

   forecast for the business WITHOUT the new product.

5. In a column next to your 13-24 forecast, create a new forecast for 13-

   24 by adding Docs desired increase in sales from the sale of new time machines in order to earn the extra $30,000 profit (Sales dollars from BE part #5) This is the forecast for the business WITH the new product.