Johnson Lumber Financial Data

$($Ignore taxes$)$

ANNUAL REVENUE PRIOR TO THE FIRE

REVENUE $ $15,175,460$ Sale of lumber and wood chips

Less: Cost of goods sold $ $10,622,822$ Material and wages @$70\%$ of revenue

Gross margin $ $4,552,638$ At $30\%$ of revenue

Less: Operating expenses $ $2,293,993$ Selling, general and admin expenses

NET INCOME $($EBIT$)$ $ $2,258,645$ EBIT Earnings before interest and tax

GROSS MARGIN $\%30\%$ Gross margin$/$Revenue

NET MARGIN $\%14\mathrm{.}9\%$ Net income$/$Revenue

Note: Total expenses $=$ Cost of goods sold assumed to be variable @ $70\%$ of revenue $+$ Operating expenses assumed to be fixed $=$ $$10,622,822+$ $$2,293,993=$ $ $12,916,815$

ALTERNATIVES

$1$ STOP ALL PRODUCTION AND BUILD BACK THE MILL USING INSURANCE PAYOUT of $$1$ MILLION.

Time to rebuild: $1$ year

Expected revenue after rebuild estimated @$55\%$ of pre fire revenue

$2$ CONTINUE PRODUCTION OFF SITE BY LEASING NEIGHBORING FACILITY

REVENUE $($from off site production$)$ $ $7,800,000$

Less: Cost of goods sold @$70\%($Material and wages$)$ $ $5,460,000$

GROSS MARGIN @$30\%$ $ $2,340,000$

Less: Operating expenses with lease

Lease of space $$25$ per sq ft for $10000$ sq ft per month $ $3,000,000$

Lease of machinary $$10,000$ per month $ $120,000$

Insurance equipment damage $$15,000$ per month $ $180,000$

Transportation $$12,000$ per month $ $144,000$

TOTAL OPERATING EXPENSES $ $3,444,000$

NET INCOME $($EBIT$)=$ GROSS MARGIN $-$ TOTAL OPERATING

EXPENSES $ $(1,104,000)$

BENEFITS Expected revenue after rebuild estimated @ $80\%$ of pre fire revenue