Project Details

The Acme Gadget Company designs and manufactures consumer gadgets. Last year, Acme began development of three prototype gadgets with the intention of bringing all three to market.However, a recent downturn in the economy has forced Acme to reconsider due to decreased consumer demand that is projected to remain low for 2-3 years. As such, Acme will bring only one of the prototypes to market. They've hired a consulting firm to advise which prototype to bring to market. The managing partner of the consulting firm has assigned you to conduct the following analyses: Production analysis, Pricing Analysis, Financing analysis and Break-even analysis. The information you need to conduct each analysis is provided below.

Production analysis

Prototypes of three gadgets were produced by Research and Development (R&D) teams that consisted of engineers, hardware technicians, and software technicians.It is standard practice for Acme's R&D team members to focus on several projects at once as determined by the needs of the project and each team member's specific expertise. To recover the Full Time Equivalents required for the production of each Gadget, Acme tracks the number of hours that engineers, hardware technicians and software technicians dedicate to each project by hours per FTE. The following data was collected during the production of the prototypes:

Gadget Hrs /Engineering FTE Hrs /Hardware Tech FTE Hrs /Software Tech FTE Total # of hrs per 500,000 prototypes # of prototypes prod.

A 25 45 25 1,000 20,000

B 195 30 30 1,500 25,000

C 62 58 98 2,000 16,000

From the production data, determine the number of Engineer FTEs, Hardware Technician FTEs and Software Technician FTEs needed to create the prototypes of Gadget A, Gadget B and Gadget C. Using this information complete the table below.

Gadget Engineering FTE/ Gadget Hardware Technician FTE/ Gadget Software Technician FTE/ Gadget

A

B

C

Pricing Analysis

Acme's Marketing team has established a MSRP for each gadget based on the feedback of consumers and tech journalists that were selected to review the prototype gadgets. The MSRP has been set as $449, $499, and $425 for Gadgets A, B and C respectively. Acme's sales team wishes to establish a net price (to retailers) that will allow retailers a series of markdowns for the gadget, first by 15% during regular sale periods (to occur up to 3 times a year), with room for a second discount of 10% during special sale periods (Black Friday and Boxing Day), while still allowing the retailer a mark-up of at least 20% over the net price. Find the maximum net price for each gadget and determine how this net price impacts the breakeven analysis below.

Financing Analysis

In order to launch the new gadget line, Acme is securing investor financing to cover the first year of fixed costs from private investors. A first private investor is willing to loan Acme the funds needed to cover the fixed costs associated with producing the chosen gadget to be paid back over 12 equal payments, with a fixed cost of borrowing of $1,350,000.A second investor is willing to loan the money under a simple interest payment plan of 2.5% interest but requires the loan be repaid in 6 months.Given that Acme will have to borrow Y dollars, provide Acme with a detailed comparison of the financing options and determine how each impacts the breakeven analysis below.

Breakeven analysis

The following Cost and Sales projections were captured by the Acme's production and Sales/Marketing teams.

Table : Projected costs

Gadget Factory Utilities Property Taxes Salary - Salary - Salary - Financing costs

Set-up ($/year) ($/year) ($/year) Engineers Hardware technician Software technician ($/year)

$/FTE $/FTE $/FTE

A 10,000,000 50,000 25,000 185,000 150,000 120,000 TBD

B 7,500,000 50,000 25,000 185,000 150,000 120,000 TBD

C 12,500,000 50,000 25,000 185,000 150,000 120,000 TBD

Table : Projected sales

Gadget Production Capacity Target Sales at Target Sales at Target Sales at MSRP Net Price

(Units/year) 50% production Capacity 75% production Capacity 100% production Capacity

(Units/year) (Units/year) (Units/year)

A 250,000 125 000 187,500 250,000 449 TBD

B 150,000 75,000 112,500 150,000 499 TBD

C 1,000,000 500,000 750,000 1,000,000 425 TBD

Run a break-even analysis using the information captured in projected costs and revenues tables and any relevant information from your production, pricing and financing analyses.

Report

Once you've completed your analyses, you'll need to detail your findings in a report.

Your report should include:

An introduction that provides an overview of why the report was requisitioned and explaining why each analysis is conducted,

A Production analysis that provides an overview of how the analysis was conducted and provides sample calculations so the work can be verified,

A Pricing Analysis that provides an overview of how the analysis was conducted and provides sample calculations so the work can be verified, and

A Funding analysis that provides an overview of how the analysis was conducted and provides sample calculations so the work can be verified

A Break-even analysis that provides an overview of how the analysis was conducted and provides sample calculations so the work can be verified

A conclusion that recommends which Gadget to bring to market.