Standard Company is negotiating to do a consignment inventory for a customer ABC mfg. The customer would like 250K of inventory onsight at all times for use, which would be purchased ahead of time (consignment) by Standard. On a weekly basis, after scanning and replenishing products, Standard would charge the customer the cost of goods plus 20% profit margin.

The customer expects to replenish inventory but is unsure what the annual spend would be. It could be only 100K or it could be up to 400K annual. The customer has agreed to pay 57K per year as a service fee (roughly 20% of COGS) to cover the initial carrying cost of the 250K of consigned inventory in addition to whatever inventory is used.

If Standard were to enter into a 1 year contract, at what sales volume in dollars would they need to sell to be profitable/break even?

At what point would it be profitable on a 3 year contract, assuming any remaining inventory of the 250K is left?