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Case study - Essay Example

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BUSINESS ANALYSIS Name Instructor Institution Date Course Description Amount (input) Amount (output) Sales price(per car) +75,000 Materials costs(per car) -37,000 Direct labor rate/hour +33 Production persons –hours (per car) -900 Production overheads (annual ) +50, 000 Supervision (annual) -130, 000 Sales overhead (annuals) +120, 000 Other office overheads (annual) +32, 000 Managerial (annual) -300,000 Total +277,033 -467,900 Cash flow for Worplestrop partnership From the above cash flow the outputs are more than the inputs…
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A higher level to the previous or a higher level as compared to the competitor indicates that the business is prospering. year 2012 2013 2014 2015 2016 unit car sales expected 80 120 150 180 190 The profitability of the company: the organization has an anticipated annual change of 1.02. This shows that the organization is on the positive trend in profit making. The profits can only increase if the company focuses more in cost reduction than in production. Breakeven levels Unit break-even for the year 2012 Average Annual Fixed Cost/ (Average Per Unit Sales Price - Average Per Unit Variable Cost) Fixed costs= (direct labor +supervision + office staff+ managerial) 550,033 =33+130,000+120,000 + 300,000 Variable costs = production overheads + production person-hours + sales overheads + other office overheads 100,900 = 50,000 + 900 + 18,000 + 32,000 Therefore: average annual fixed costs = 550,033/ 12= 45836.08 Average per unit sales = 75000/80= 937.5 Average per unit variable cost = total variable cost / number of units/12 =100900/80/12= 105.10 Break even = 45836.08/ (937.50-105.10) = 55 units Sales break even for the year 2012 Annual Fixed Cost/1 - (Average Per Unit Variable Cost ? Average Per Unit Sales Price) =550033/ 1- (105.10/937.5) =550033/1-0.1121 =550033/0.8879 =619476.29 ? Sensitivity of the figures to the key estimates The estimated figures show a positive increase in both the expenses and incomes. For example on the sales estimates there is a gradual increase in the number of units to be sold annually. This is not reflected in the other expenses. For example it is assumed that the variable costs are not changing with the increase in sales. Other factors not considered include market trends, additional investments, depreciation of the cars. Too the interests on the borrowed capital are assumed that they will remain unchanged for the due period. There should be a provision for such changes as the global economy is fluctuating. Also there are provisions for bad debts. Everything is assumed to a clear cut transaction. Recommendations The company therein is sales oriented. It projects a sharp increase in sales without putting into focus the other internal and external factors. The company therefore change this trend and focus on both production and cost reduction. References Cooperative extension, (n.d), Agr-business management, viewed April 21, 2012, ... Read More
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