Help on how to complete the decision sheet

COMPANY: Choose a name for your company.

Think of a strategy you want for your business. Following are the two extremes pricing strategies:- cheap product (low margin) and sell more. Ex: Conair- expensive product (high margin) and sell small quantity. Ex: Dyson1

Production

1.1 Quantity produced: how many hairdryers are you going to produce ?As stated in the game, at January 1st 2020, you have 9 assembly lines that can produce in total90,000 hair dryers (10,000 units per line).It is also written that the average market of the year 2020 per company is approximately 100,000units, so you can expect to sell 100,000 more or less. Maybe, you expect to sell more because youwill advertise your products a lot (then your advertising expenses should be high). Or maybe youexpect to sell less than 100,000 units because you don't want to invest in new assembly lines(needed to produce more).In your inventory of finished goods, you have 5,000 hair dryers. Therefore, if you do not invest inpurchasing new assembly lines, you can sell your inventory of 5,000 goods + the max quantityproduced with 9 lines being 90,000 95,000 units.Notice that you can expect to produce more than sell. Therefore, your decision in 2.1 can be lowerthan 1.1 if you want to have inventories of finished products in 2021. It is your decision !

1.2 Investments (number of new assembly lines): how many assembly lines do you want toacquire?This should be consistent with your decision for the quantity produced (1.1).If you want to produce more than 90,000 units, you need to invest in a new line. You can increaseyour production capacity by 10,000 units per new line. For instance, if you invest in one line, youincrease your production capacity by 10,000, so that your total production capacity is 100,000. Ifyou invest in two line, your production capacity is 110,000....Moreover, to simplify, we assume that we use our equipment at their maximum (i.e., if you havethe capacity to produce 100,000, you produce 100,000 units). But you need to understand thatsometimes, companies that do not want to have finished goods inventories in the next years, theyprefer to produce only 40 units even if they have the capacity to produce 100 units.

Maybe, you prefer not to invest in new lines but think of your next years production when two ofyour assembly lines will be scrapped (i.e., fully depreciated). See depreciation table: page 2 of thegame instructions.

1.3 Purchases of raw materials (quantity): Based on the quantity you want to produce, howmany raw materials do you need to purchase?To produce one hairdryer, you need one set of raw materials. Raw materials cost is 18$ per set.Also, you have some raw materials inventory that you can use in 2020 for your production. OnJanuary 1st 2020, the raw materials inventory is 10,000 sets.You can also purchase more raw materials than needed for your 2020 production in order to haveinventories of raw materials for 2021.

1.4 Consumption of raw materials (quantity): How many raw materials will I consume duringthis year 2020?2

Sales2.1 Quantity sold: how many units I expect to sell?First, you need to calculate the number of units available for sale which comprises of:- Number of units available in our inventory: 5,000 hairdryers.- Number of units produced (1.1)You can expect to sell less units than the number of units available in order to have inventories fornext year.2.2 Advertising expenditures (in $ thousands): What is my advertising budget for the year 2020?List the total costs of manufacturing:- Direct cost (raw materials + direct labor)*- Indirect labor: administrative staff- Rental cost of office- Taxes (see Balance sheet Liabilities)- Depreciation* To simplify, we assume that the finished products are always valued at $27 per unit (direct costin 2020). This cost does not change during the game even if the components of the cost change(employers salaries for instance). You multiply this unit direct cost by the number of unitsproduced (1.1).

Add up all these costs. Advertising expenses usually represent 5% more or less of the costs ofproducts. If you decide to have a large advertising budget you can expect to sell more than yourcompetitors2.3 Unit Selling price in $: how to determine your selling price?Price = Costs + MarginList the total costs of manufacturing one hairdryer:- Direct cost (raw materials + direct labor) ($27 per unit produced)- Indirect labor: administrative staff- Rental cost of office- taxes (see Balance sheet Liabilities)- Depreciation (this increase if you invested in new assembly lines)- Advertising expenditures (4.1: usually represent more or less 5% of the previous total cost)You will get a cost per unit by adding up all these unit costs and divide by the produced quantity.Add your margin to the unit cost: between 10-50% of the costs.- cheap product (low margin) and sell more. Ex: Conair- expensive product (high margin) and sell small quantity. Ex: Dyson3 Staff3.1 Hiring new employees (number of people): Do you want to hire new employees?It is written in the game that Each worker can mount normally 2,000 items per year. Currently,the company employs 50 workers. So, the maximum number of hairdryers that your company canproduce is 100,000 units per year (2,000 * 50). If the quantity produced (1.1) is lower than 100,000units then it is not necessary to hire new employees. But, you can still do it.3.2 Dismissal (number of people): do you want to dismiss employees?3.3 Gross annual salary (excluding employers payroll taxes) (in $, per employee): Do youwant to increase the salary of your employee? I do not recommend to decrease it.4. Audit feesIn 2020, audit fees are 0.5. Dividends and other5.1 distributed dividends: How much dividends you want to distribute to your shareholders?