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Answered: - Hansson Private Label Case Preparation Questions Bring a one page


Hansson Private Label Case Preparation Questions

Bring a one page hard copy of your answers.

Please read the facts of the case and prepare answers for the following two questions.

When answering these questions, focus on the facts of the case and not additional outside research.

1 ? Identify three business or financial risks faced by Hansson Private Label (HPL) if they decide to increase their share of sales to their largest customer.

2 ? Identify two financial metrics you could use to gain insight into HPL?s position relative to the four competitors listed in the case. Briefly explain how each of the financial metrics you chose help you evaluate HPL?s competitive position.


4021

 

REV: MARCH 1, 2010

 


 

ERIK STAFFORD

 

JOEL L. HEILPRIN

 

JEFFREY DEVOLDER

 


 

Hansson Private Label, Inc.:

 

Evaluating an Investment in Expansion

 

Introduction

 

On a frigid Sunday night in late February 2008, Tucker Hansson pored over a proposal developed

 

by his firm?s manufacturing team. It called for investing $50 million to expand production capacity at

 

Hansson Private Label (Hansson or HPL). For Hansson, a private company, this would be a

 

significant investment. The company had not initiated a project of that magnitude for more than a

 

decade, and the expansion wasn?t without significant risk. It would be likely to double HPL?s debt

 

and to greatly increase customer concentration. This was a critical juncture for the firm Tucker

 

Hansson had carefully built over 15 years. He wondered whether the return on investment would be

 

large enough to justify the effort and risk. He also wondered about the best means of evaluating the

 

potential investment.

 

HPL manufactured personal care products?soap, shampoo, mouthwash, shaving cream,

 

sunscreen, and the like?all sold under the brand label of one or another of HPL?s retail partners,

 

which included supermarkets, drug stores, and mass merchants. The firm, whose sales had grown

 

steadily over the years, generated $681 million in revenue in 2007.

 

Three weeks earlier, HPL?s largest retail customer had told Hansson that it wanted to significantly

 

increase HPL?s share of their private label manufacturing. Given that HPL was already operating

 

near full capacity, it would need to expand to accommodate this important customer without

 

?cannibalizing? a significant portion of HPL?s existing business. The rub was, the customer would

 

commit to only a three-year contract?and it expected a go/no-go commitment from Hansson within

 

30 days.

 

Although he was worried about risk, Hansson was equally invigorated by the prospects of rapid

 

growth and significant value creation. He knew of numerous examples of manufacturers, both in

 

private label and branded businesses, who had risked their future by locking in a strong relationship

 

with a huge, powerful retailer. For many, the bet had delivered a big payout that lasted for decades.

 

________________________________________________________________________________________________________________

 

HBS Professor Erik Stafford, Illinois Institute of Technology Adjunct Finance Professor Joel L. Heilprin, and writer Jeff DeVolder prepared this

 

case specifically for the Harvard Business Publishing Brief Case Collection.

 

Though inspired by real events, the case does not represent a specific situation at an existing company, and any resemblance to actual persons or

 

entities is unintended. Cases are developed solely as the basis for class discussion and are not intended to serve as endorsements, sources of

 

primary data, or illustrations of effective or ineffective management.

 

Copyright ? 2009 Harvard Business Publishing. To order copies or request permission to reproduce materials, call 1-800-545-7685 or go to

 

www.hbsp.harvard.edu/educators. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted,

 

without the permission of Harvard Business Publishing.

 

Harvard Business Publishing is an affiliate of Harvard Business School.

 


 

This document is authorized for use by Justin Wylie, from 1/1/2015 to 5/31/2016, in the course:

 

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4021 | Hansson Private Label, Inc.: Evaluating an Investment in Expansion

 


 

Hansson?s employees had completed their fact-gathering and provided a multifaceted analysis of

 

the proposed project, which he now held in his hands. The time had come to do a final analysis on his

 

own and make a decision.

 


 

Company Background

 

HPL started in 1992, when Tucker Hansson purchased most of the manufacturing assets of Simon

 

Health and Beauty Products. Simon had decided to exit the market after struggling for years as a

 

bottom-tier player in branded personal care products. Hansson was a serial entrepreneur who had

 

spent the previous nine years buying manufacturing businesses and selling them for a profit after he

 

improved their efficiency and grew their sales. He bought HPL for $42 million?$25 million of his

 

own funds and $17 million that he borrowed?which was (and remained) the largest single

 

investment Hansson had ever made. Hansson was seeking to capitalize on what he saw as the

 

nascent but powerful trend of private label products? increasing their share of consumer-products

 

sales. Although the concentration of his wealth into a single investment was risky, Hansson believed

 

he was paying significantly less than replacement costs for the assets?and he was confident that

 

private label growth would continue unabated.

 

Hansson?s assessment of private label growth prospects proved to be prescient, and his

 

unrelenting focus on manufacturing efficiency, expense management, and customer service had

 

turned HPL into a success. HPL now counted most of the major national and regional retailers as

 

customers. Hansson had expanded conservatively, never adding significant capacity until he had

 

clear enough visibility of the sales pipeline to ensure that any new facility would commence

 

operations with at least 60% capacity utilization. He now had four plants, all operating at more than

 

90% of capacity. He had also maintained debt at a modest level to contain the risk of financial distress

 

in the event that the company lost a big customer. HPL?s mission had remained the same: to be a

 

leading provider of high-quality private label personal care products to America?s leading retailers.

 

(See Exhibit 1, which presents HPL?s historical financial statements.)

 


 

The Market for Personal Care Products

 

The personal care market included hand and body care, personal hygiene, oral hygiene, and skin

 

care products. U.S. sales of these products totaled $21.6 billion in 2007. The market was stable, and

 

unit volumes had increased less than 1% in each of the past four years. The dollar sales growth of the

 

category was driven by price increases, which were also modest, averaging 1.7% annually during the

 

past four years. The category featured numerous national names with considerable brand loyalty.

 

Branded offerings ranged from high-end products such as Oral-B in the oral hygiene category to

 

lower-end names such as Suave in hair care. Private label penetration, measured as a percentage of

 

subsegment dollar sales, ranged from 3% in hair care to 20% in hand sanitizers. (Exhibits 2 and 3

 

present data about private label sales and market share.)

 

Consumers purchased personal care products mainly through retailers in five primary categories:

 

mass merchants (e.g., Wal-Mart), club stores (e.g., Costco), supermarkets (e.g., Kroger), drug stores

 

(e.g., CVS), and dollar stores (e.g., Dollar General). As a result of significant consolidation and growth

 

in retail chains over the past 15 years, manufacturers of consumer products depended heavily on a

 

relatively small number of retailers that had a large national presence. To survive in the personal care

 

category, manufacturers had to persuade large chains to carry their products, provide adequate and

 

highly visible shelf space, and cooperate with product promotions. Many consumer-goods companies

 


 

2

 


 

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Hansson Private Label, Inc.: Evaluating an Investment in Expansion | 4021

 


 

found it increasingly difficult to do so, as roughly 80,000 new products were launched each year,

 

creating intense competition for shelf space.

 


 

The Private Label Industry

 

With private label brands, retailers rather than manufacturers controlled the production,

 

packaging, and promotion of the goods. Although some large retailers had integrated vertically and

 

owned the manufacturing facilities for their private label products, most retailers purchased their

 

goods from third-party manufacturers. Some manufacturers produced private label products in

 

addition to their branded goods (e.g., Kimberly-Clark), whereas others (e.g., Procter & Gamble) did

 

not produce any private label products.

 

Historically, retailers had carried private label goods to offer consumers lower-priced alternatives

 

to national branded goods. Over time, quality improvements in private label goods and their

 

packaging led to increased acceptance by consumers. Acceptance was so widespread that 99.9% of

 

U.S. consumers purchased at least one private label product in 2007, according to AC Nielsen. This

 

greater acceptance led private label sales across all product categories to exceed $70 billion in 2007.

 

Retailers had driven, and still drove, these increases in consumer acceptance. They could increase

 

their profits by capturing a greater share of the value chain than they did with branded goods, on

 

which manufacturer profits per unit could be twice those of the retailer, especially if the brand was

 

well known (e.g., Crest toothpaste). With private label goods, retailers? cost of goods was as much as

 

50% lower than with branded products. Given the reduced cost, retailers could double their profit per

 

unit sold despite lower selling prices. Gaining further consumer acceptance of private label goods

 

and prices remained a huge opportunity for retailers, as these goods constituted less than 5% of sales

 

in many product categories. In the $21.6 billion personal care category, private label products

 

accounted for $4 billion of sales at retail (less than 19%), which translated to $2.4 billion in wholesale

 

sales from the manufacturers. Hansson estimated that HPL had a little more than a 28% share of that

 

total (see Exhibit 4, which shows HPL?s sales into its retail channels).

 


 

Investment Proposal

 

The investment proposal in Hansson?s hands included the following elements:

 

Cost Components

 

Facility Expansion

 

Manufacturing Equipment

 

Packaging Equipment

 

Working Capital(1)

 

Total Investment

 


 

Amount

 

$10,000

 

20,000

 

15,000

 

12,817

 

$57,817

 


 

Est. Life

 

20yrs.

 

10yrs.

 

10yrs.

 


 

Depr.

 

$ 500

 

2,000

 

1,500

 

0

 

$4,000

 


 

(1) The increase in working capital is not expected to occur up front at the time of the initial

 

investment. It is assumed to take place throughout the year and should be considered as part of the

 

2009 cash flows.

 


 

Note: Working capital is defined as accounts receivable plus inventory less accounts payable and

 

accrued expenses. At the end of the project, working capital will be returned in an amount equal to

 

accounts receivable less accounts payable.

 


 

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3

 


 

4021 | Hansson Private Label, Inc.: Evaluating an Investment in Expansion

 


 

The team that developed the proposal was led by Robert Gates, HPL?s Executive Vice President of

 

Manufacturing. They found the investment attractive because the additional capacity would allow

 

HPL to expand its relationship with its largest customer (whose sales were growing in the U.S. and

 

abroad) and generate an acceptable payback. The expansion would also create the opportunity to

 

grow HPL?s other customer relationships. Moreover, it might change the competitive landscape.

 

Virtually all unit growth came from private label penetration gains that, although steady, were too

 

modest to support significant expansions by multiple producers. Knowing this, HPL?s competitors

 

might be deterred from expanding their production capacity in HPL?s personal care subsegments?

 

especially since HPL?s announcement would be supported by a multiyear contract with a powerful

 

customer.

 

However, the team acknowledged that the project presented risks unlike any that HPL had

 

previously encountered. First, making this level of investment and incurring the associated debt

 

would significantly increase HPL?s annual fixed costs and its risk of financial distress should sales

 

fall, costs rise, or both. Second, the sales that would support the capacity growth would come, at least

 

initially, from what was already HPL?s largest customer. Although HPL had a long and positive

 

relationship with the customer, the demand could disappear at the end of the initial three-year

 

contract.

 


 

Final Steps Toward a Decision

 

The annual capital planning process took place during an all-day working session hosted by

 

Tucker Hansson each October. In the meeting, Hansson and his staff, including the managers of each

 

facility, reviewed the capital requests and the related scoring prepared by CFO Sheila Dowling. They

 

agreed on a prioritization of the projects, discussed the trade-offs of choosing various projects over

 

others, and inquired into the opportunities and consequences of pursuing listed projects at lower

 

levels of expenditure. The capital budget for the next year was typically finalized at Hansson?s first

 

staff meeting each December when any unanswered questions from the October session were

 

addressed and the team reviewed the final plan one last time, including consideration of the latest

 

forecast for EBITDA and the resulting capital budget for the following year.

 

For his part, Hansson usually relied heavily on Dowling?s scoring to compare projects, but her

 

typical approach to risk assessment was not helpful for this project. The size of the investment posed

 

additional risk beyond what HPL typically contemplated. As a result, Hansson?s questions about

 

payback and risk had a more ?macro? focus than usual; he wondered how much value the project

 

would really generate, how much risk HPL should tolerate, how the company could mitigate the

 

risks, and what the backup plans should be if unforeseen risks materialized. Making the wrong

 

decision could have serious consequences stemming from increased capacity, fixed costs, and debt

 

service. Moreover, Hansson knew that the cost of debt was likely to be pricy in terms of both interest

 

expense and restrictive covenants, and that equity financing on favorable terms was extremely

 

unlikely.

 

Hansson also knew his team was unhappy that his uncertainty was delaying the process.

 

Furthermore, he realized that after several years without a big investment, the team was beginning to

 

wonder whether he was transitioning into ?harvest mode? and, therefore, whether their days with

 

HPL were numbered. Hansson had to overcome his apprehensions and make a decision.

 

Pursuing this investment in capacity would close off all other investment opportunities for the

 

foreseeable future: The company?s financial position would be at the limit of Hansson?s comfort zone,

 

and HPL?s managerial bench would be tapped out. He found the singular focus invigorating; indeed,

 


 

4

 


 

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Hansson Private Label, Inc.: Evaluating an Investment in Expansion | 4021

 


 

the only investment opportunities HPL had evaluated in the past several years were incremental

 

additions of new product types, which now seemed meager and unambitious. At the same time,

 

Hansson was also grappling with the reality that most of his personal wealth was tied up in HPL, and

 

a further investment of this magnitude would represent a concentration of personal risk.

 

Hansson needed to launch a final review of the request before he could comfortably give the goahead. The most vexing question for Hansson was related to the appropriate discount rate. He knew

 

that discount rates were intended to reflect the degree of risk in the underlying cash flows, but he

 

also knew that the choice of discount rate could significantly affect a project?s viability. HPL?s

 

practice had always been to use an estimate of the company?s WACC as the discount rate for capital

 

budgeting projects. In Hansson?s mind, that made sense because all of HPL?s capital budgeting

 

projects were in its one line of business, manufacture of private label personal care products.

 

However, Hansson now wondered whether the proposed project should be evaluated using the

 

historical WACC. After all, the company was taking on more debt, and the project could very well

 

change the risk profile of the firm.

 

With all of this in mind, Hansson had asked Dowling to prepare a range of potential discount

 

rates (shown in Exhibit 7). To create her table, Dowling estimated HPL?s enterprise value at 7.0x last

 

fiscal year?s EBITDA, which reflected the multiple of valuation for several recent transactions in the

 

industry. Using the comparable company information shown in Exhibit 6, she considered her

 

valuation to be both conservative and reasonable.

 

The portion of the WACC analysis with which Dowling was most troubled related to estimates for

 

the cost of debt at various D/E levels. Her recent conversations with bankers led her to believe that

 

the 7.75% rate was reasonable for levels not exceeding 25% D/V, but that for larger amounts of

 

leverage the cost would be substantially greater. She just didn?t know by how much.

 

As Hansson watched the snow fall, he knew he was in for a long night. He normally left detailed

 

financial analyses to Dowling; however, this time he picked up the financial section of Gates?

 

proposal (shown in Exhibit 5) as well as Dowling?s cost of capital analysis, and began working on his

 

own NPV estimates. He also planned to generate sensitivity analyses to see how changes in key

 

project variables?especially capacity utilization, selling price per unit, and direct material cost per

 

unit?would make the investment case stronger or weaker. It would be a long night and a long day

 

tomorrow.

 


 

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5

 


 

4021 | Hansson Private Label, Inc.: Evaluating an Investment in Expansion

 


 

Exhibit 1: HPL?s Historical Financial Statements

 

Operating Results:

 

Revenue

 

Less: Cost of Goods Sold

 

Gross Profit

 

Less: Selling, General & Administrative

 

EBITDA

 

Less: Depreciation

 

EBIT

 

Less: Interest Expense

 

EBT

 

Less: Taxes

 

Net Income

 


 

2003

 

$503.4

 

405.2

 

98.2

 

37.8

 

60.4

 

6.8

 

53.6

 

5.5

 

48.1

 

19.2

 

$28.9

 


 

2004

 

$543.7

 

432.3

 

111.4

 

44.6

 

66.8

 

6.2

 

60.6

 

5.8

 

54.8

 

22.0

 

$32.8

 


 

2005

 

$587.2

 

496.2

 

91.0

 

45.8

 

45.2

 

6.0

 

39.2

 

5.9

 

33.3

 

13.3

 

$20.0

 


 

2006

 

$636.1

 

513.4

 

122.7

 

51.5

 

71.2

 

5.9

 

65.3

 

5.3

 

60.0

 

24.0

 

$36.0

 


 

2007

 

$680.7

 

558.2

 

122.5

 

49.0

 

73.5

 

6.1

 

67.4

 

3.3

 

64.1

 

25.6

 

$38.5

 


 

Margins

 

NA

 

Revenue Growth

 

Gross Margin

 

19.5%

 

Selling, General & Administrative/Revenue

 

7.5%

 

EBITDA Margin

 

12.0%

 

EBIT Margin

 

10.6%

 

Net Income Margin

 

5.7%

 

Effective Tax Rate

 

39.9%

 


 

8.0%

 

20.5%

 

8.2%

 

12.3%

 

11.1%

 

6.0%

 

40.1%

 


 

8.0%

 

15.5%

 

7.8%

 

7.7%

 

6.7%

 

3.4%

 

39.9%

 


 

8.3%

 

19.3%

 

8.1%

 

11.2%

 

10.3%

 

5.7%

 

40.0%

 


 

7.0%

 

18.0%

 

7.2%

 

10.8%

 

9.9%

 

5.7%

 

39.9%

 


 

Assets:

 

Cash & Cash Equivalents

 

Accounts Receivable

 

Inventory

 

Total Current Assets

 


 

2003

 

$4.3

 

62.1

 

57.7

 

124.1

 


 

2004

 

$5.1

 

70.1

 

58.0

 

133.2

 


 

2005

 

$4.8

 

78.8

 

61.2

 

144.8

 


 

2006

 

$7.8

 

87.1

 

61.9

 

156.8

 


 

2007

 

$5.0

 

93.3

 

67.3

 

165.6

 


 

201.4

 

12.3

 

$337.8

 


 

202.9

 

12.1

 

$348.2

 


 

203.1

 

11.8

 

$359.7

 


 

202.3

 

12.5

 

$371.6

 


 

204.4

 

10.8

 

$380.8

 


 

$42.2

 


 

$45.0

 


 

$51.6

 


 

$53.4

 


 

$58.1

 


 

91.6

 


 

82.8

 


 

73.8

 


 

65.8

 


 

54.8

 


 

204.0

 

$337.8

 


 

220.4

 

$348.2

 


 

234.3

 

$359.7

 


 

252.4

 

$371.6

 


 

267.9

 

$380.8

 


 

62.1

 

57.7

 

42.2

 

77.6

 


 

70.1

 

58.0

 

45.0

 

83.1

 


 

78.8

 

61.2

 

51.6

 

88.4

 


 

87.1

 

61.9

 

53.4

 

95.6

 


 

93.3

 

67.3

 

58.1

 

102.5

 


 

Property, Plant & Equipment

 

Other Non-Current Assets

 

Total Assets

 

Liabilities & Owners' Equity:

 

Accounts Payable & Accrued Liabilities

 

Long-Term Debt

 

Owners' Equity

 

Total Liabilities & Owners' Equity

 


 

Net Working Capital:

 

Accounts Receivable

 

Plus: Inventory

 

Less: Accounts Payable & Accrued Expenses

 

Net Working Capital

 


 

(Exhibit 1 cont?d next page)

 


 

6

 


 

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Hansson Private Label, Inc.: Evaluating an Investment in Expansion | 4021

 


 

Exhibit 1, cont?d

 


 

Cash From Operations:

 

Net Income

 

Plus: Depreciation

 

Less: Increase in Accounts Receivable

 

Less: Increase in Inventory

 

Plus: Increase in Accounts Payable

 

Total Cash From Operations

 


 

2003

 

$28.9

 

6.8

 

3.1

 

0.5

 

0.3

 

$32.4

 


 

Cash From Investing:

 

Capital Expenditures

 

$7.3

 

Plus: Increases in Other Non-Current Assets 0.5

 

Total Cash Used in Investing

 

$7.8

 

Cash From Financing:

 

Repayment of Debt

 

Plus: Dividend Payments

 

Cash Used in Financing

 

Total Cash Generated

 


 

2004

 

$32.8

 

6.2

 

8.0

 

0.3

 

2.8

 

$33.5

 


 

$7.7

 

(0.2)

 

$7.5

 


 

2005

 

$20.0

 

6.0

 

8.7

 

3.2

 

6.6

 

$20.7

 


 

$6.2

 

(0.3)

 

$5.9

 


 

2006

 

$36.0

 

5.9

 

8.3

 

0.7

 

1.8

 

$34.7

 


 

$5.1

 

0.7

 

$5.8

 


 

2007

 

$38.5

 

6.1

 

6.2

 

5.4

 

4.7

 

$37.7

 


 

$8.2

 

(1.7)

 

$6.5

 


 

$8.0

 

14.4

 

$22.4

 


 

$8.8

 

16.4

 

$25.2

 


 

$9.0

 

6.1

 

$15.1

 


 

$8.0

 

17.9

 

$25.9

 


 

$11.0

 

23.0

 

$34.0

 


 

$2.2

 


 

$0.8

 


 

($0.3)

 


 

$3.0

 


 

($2.8)

 


 

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7

 


 

4021 | Hansson Private Label, Inc.: Evaluating an Investment in Expansion

 


 

Exhibit 2: Private Label Share of U.S. Consumer Packaged-Goods Spending

 

Unit share

 


 

Dollar share

 


 

25%

 

21.3%

 


 

21.2%

 


 

21.0%

 

20%

 


 

16.1%

 


 

15.8%

 


 

15.7%

 

15%

 

10%

 

5%

 

0%

 

2005

 


 

2006

 


 

2007

 


 

Source: IRI

 


 

Exhibit 3: U.S. Sales in HPL?s Target Markets (in US$ millions)

 

S kin care

 


 

Oral hygiene

 


 

$1,909

 


 

$1,990

 


 

$4,328

 


 

Personal hygiene

 


 

Hand and body care

 


 

$24,000

 

$21,000

 


 

$2,229

 


 

$4,374

 


 

$4,397

 


 

$4,417

 


 

$4,352

 


 

$6,537

 


 

$6,616

 


 

$6,700

 


 

$6,471

 


 

$7,100

 


 

$7,400

 


 

$7,700

 


 

$8,000

 


 

$8,300

 


 

2003

 


 

$15,000

 


 

$2,151

 


 

$6,434

 


 

$18,000

 


 

$2,071

 


 

2004

 


 

2005

 


 

2006

 


 

2007

 


 

$12,000

 

$9,000

 

$6,000

 

$3,000

 

$0

 


 

Source: Datamonitor

 


 

Note: These figures include sales of both branded and private label products.

 


 

8

 


 

BRIEFCASES | HARVARD BUSINESS PUBLISHING

 


 

This document is authorized for use by Justin Wylie, from 1/1/2015 to 5/31/2016, in the course:

 

CMBA 5817: Financial Management - Nelson (Spring 2016), University of Minnesota.

 

Any unauthorized use or reproduction of this document is strictly prohibited.

 


 

Hansson Private Label, Inc.: Evaluating an Investment in Expansion | 4021

 


 

Exhibit 4: HPL?s Sales into Its Retail Channels

 

Figures represent wholesale prices.

 

Sales (US$ millions) for Year Ending December 31

 

2003

 

2004

 

2005

 

2006

 

2007

 


 

Channel

 

Mass merchants

 

Grocery

 

Club

 

Drug

 

Dollar

 

All othersa

 


 

170

 

91

 

136

 

55

 

22

 

31

 


 

193

 

92

 

141

 

60

 

24

 

33

 


 

220

 

92

 

149

 

66

 

26

 

34

 


 

247

 

92

 

159

 

73

 

29

 

37

 


 

268

 

94

 

167

 

80

 

32

 

40

 


 

Total

 


 

505

 


 

543

 


 

587

 


 

637

 


 

681

 


 

a The category ?All others? comprises convenience store sales and sales to miscellaneous distributors.

 


 

Exhibit 5: Excerpt of Financial Assumptions in Capital Request Form(1)

 

Revenue Projection:

 

Total Capacity (000's)

 

Capacity Utilization

 

Unit Volume

 

Selling Price Per Unit - Growing at

 

Revenue

 


 

2009

 

80,000

 

60.0%

 

48,000

 

1.77

 

84,960

 


 

2010

 

80,000

 

65.0%

 

52,000

 

1.81

 

93,881

 


 

2011

 

80,000

 

70.0%

 

56,000

 

1.84

 

103,124

 


 

2012

 

80,000

 

75.0%

 

60,000

 

1.88

 

112,700

 


 

2013

 

80,000

 

80.0%

 

64,000

 

1.92

 

122,618

 


 

2014

 

80,000

 

85.0%

 

68,000

 

1.95

 

132,887

 


 

2015

 

80,000

 

85.0%

 

68,000

 

1.99

 

135,545

 


 

2016

 

80,000

 

85.0%

 

68,000

 

2.03

 

138,256

 


 

2017

 

80,000

 

85.0%

 

68,000

 

2.07

 

141,021

 


 

2018

 

80,000

 

85.0%

 

68,000

 

2.12

 

143,841

 


 

Production Costs:

 

Raw Materials Per Unit Growing at 1% 1.0%

 

3.0%

 

Manufacturing Overhead Growing at

 

Maintenance Expense Growing at

 

3.0%

 


 

0.94

 

3,600

 

2,250

 


 

0.95

 

3,708

 

2,318

 


 

0.96

 

3,819

 

2,387

 


 

0.97

 

3,934

 

2,459

 


 

0.98

 

4,052

 

2,532

 


 

0.99

 

4,173

 

2,608

 


 

1.00

 

4,299

 

2,687

 


 

1.01

 

4,428

 

2,767

 


 

1.02

 

4,560

 

2,850

 


 

1.03

 

4,697

 

2,936

 


 

Salaried Labor Cost:

 

Managers

 

Average Annual Fully Loaded Cost

 

Total Salaried Labor Cost

 


 

4

 

160.0

 

640.0

 


 

4

 

165.6

 

662.4

 


 

6

 

171.4

 

1,028.4

 


 

6

 

177.4

 

1,064.4

 


 

8

 

183.6

 

1,468.8

 


 

8

 

190.0

 

1,520.2

 


 

8

 

196.7

 

1,573.4

 


 

8

 

203.6

 

1,628.5

 


 

8

 

210.7

 

1,685.5

 


 

8

 

218.1

 

1,744.5

 


 

20.00

 

2,000

 

40,000

 

450

 

18,000.0

 


 

20.70

 

2,000

 

41,400

 

473

 

19,570.9

 


 

21.42

 

2,000

 

42,849

 

509

 

21,814.0

 


 

22.17

 

2,000

 

44,349

 

545

 

24,190.2

 


 

22.95

 

2,000

 

45,901

 

582

 

26,706.0

 


 

23.75

 

2,000

 

47,507

 

618

 

29,368.2

 


 

24.59

 

2,000

 

49,170

 

618

 

30,396.1

 


 

25.45

 

2,000

 

50,891

 

618

 

31,460.0

 


 

26.34

 

2,000

 

52,672

 

618

 

32,561.1

 


 

27.26

 

2,000

 

54,516

 

618

 

33,700.7

 


 

18,640.0

 


 

20,233.3

 


 

22,842.4

 


 

25,254.6

 


 

28,174.8

 


 

30,888.5

 


 

31,969.6

 


 

33,088.5

 


 

34,246.6

 


 

35,445.2

 


 

Ho...

 


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