(ONLY DATA PROVIDED BELOW IT IS NOT INCOMPLETE)
ANSWER PART A & B
Dashboard Logistics Inc; (DLI) Dashboard Logistics Inc. (DLI) is looking to revolutionize the supply chain market by reducing the complexities that smaller rms experience in the supply chain process. Typically, \"startup\" rms 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 nd 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 venturie, has taken the hassle out of this process by nding 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 nd 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 efciently. " Currently, DLI gains"customers through direct sales. They estimate their cost of gaining a new customer to be $500 based on approximately 16 hours of sales effort and the associated time to \"on board\" a customer. The hourly cost of the sales e'ort is $30 an hour, DLI is targeting a narrow niche of customers characterized as having prepackaged 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 fulllment 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 ouline, 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. S- Commerce 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 Board to get funding to grow their company. DLI plans to use $6,000 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 plan to use the other $4,000 to hire a programmer to develop a sales tool to help DLI reach thousands of businesses that go through company incubators and venture capital rms. DLI also plans to use some of its sales efforts to start strategic partherships with company incubators to become preferred vendors and be able to reach more startups. Ideally, gDLI 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. r As part of the funding process, pm 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. 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 andfor 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. / Part A Questions: 1. Describe the industry and the competitors in which DLI is entering. Discuss DLI's strategy to compete in this market. 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?) 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)? 4. Prepare a contribution margin income statement by month with and without the funding. Comment on DLI's cost structure. 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. 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?Part B Questions: assume grant funding for these questions 7. 10. 11. Which forecasts will the Board be most concerned about accuracy andfor not meeting the projections? Why? How should DLI respond to alleviate some of the Board's concerns? : 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? 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 the number of paying customers by 15%. Is this a good idea? Provide both quantitative and qualitative support. You believe that the Board will inquire about expanding the customerbase to customers who will need some packaging services. Assume that variable costs per transaction will increase by $.10 per transaction, and DLI will have to incur additional monthly xed eostsof $4,500. if DLI sets a selling price per transaction of $1.75 per transaction, would this product expansion be benecial? Provide both quantitative and qualitative support. What other factors should DLI consider with the product expansion? What metrics should DLI use to measure the performance of sales people? Table 1 DASHBOARD LOGISTICS INC (DLI) Sales Data January February March April Sales Forecast May June July August September October November December Sales Pipeline without Funding Qualified Customers (Companies) 112 246 400 Interested Customers 800 1200 1600 2000 2400 40 60 2800 120 3200 240 Quoted Customers 360 3600 4000 480 600 5 10 720 840 960 16 1080 32 48 1200 Paying Customers 64 1 80 96 1 112 128 144 4 6 8 160 10 12 14 16 18 20 Sales Pipeline with Funding Qualified Customers (Companies) 112 246 1000 Interested Customers 1400 1800 2200 2600 3000 40 3400 60 300 3800 420 540 4200 4600 Quoted Customers 660 780 5 900 10 1020 1140 40 1260 56 1380 Paying Customers 72 88 104 1 120 136 5 7 152 168 9 184 11 13 15 17 19 21 23 Monthly Revenue # Customers 1 1 5 7 Avg Transactions per Customer* 9 11 13 15 1103 17 1500 19 2000 2500 21 3000 23 Avg Selling Price per Transaction 3300 $0.10 3500 $0.50 4000 4500 $0.75 4700 $0.85 4800 Total Monthly Revenue $1.00 5000 $110 $1.00 $750 $1.00 $7,500 $1.00 $14,875 $1.00 $27,000 $1.00 $36,300 $45,500 $1.00 $1.00 $60,000 $76,500 $89,300 $100,800 $115,000 *Transactions are orders placed by each customer with DLI.Table 2 DASHBOARD LOGISTICS INC (DLI) Pro Forma Profit and Loss January February March April May June July August September October November December Total 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 Operating Expenses Executive, Sales, & Misc. Expenses 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 Engineers $0 $0 SO $0 $0 $5,000 $10,000 $10,000 $10,000 $10,000 $10,000 $55,000 Marketing $0 $0 SO SO SO $0 $0 $6,000 $6,000 $6,000 $6,000 $24,000 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 Servers/Hosting $18 $20 $45 $68 $96 $124 $152 $195 $245 $283 $317 $360 $1,922 Travel Expenses SO SO $500 $500 $500 $500 $500 $1,500 $1,500 $1,500 $1,500 $9,000 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 Accounting & Legal Expenses Accounting & Legal Payroll So SO SO $200 SO $0 $200 So $0 $200 SO $600 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 Total Accounting & Legal Expenses $2,200 $2,200 $2,200 $4,200 $4,000 $4,000 $4,200 $4,000 $7,500 $7,700 $7,500 $9,000 $58,700 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 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 EBITDA ($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 Interest Expense SO $0 $0 SO $0 $0 $0 $0 $0 $0 $0 Taxes Incurred SO $702 $1,743 $5,482 $8,018 $9,239 $11,722 $12,642 $17,155 $21,361 $28,656 $116,721 Net Profit ($4,218) ($3,620) $1,053 $2,615 $8,222 $12,028 $13,859 $17,583 $18,963 $25,732 $32,042 $42,984 $167,243
