Reserve When analyzing Empower Snacks reserves this amount should be projected based on the cash flow projection coving the next 12 months. This amount is calculated based on conservative forecast. As actual results often differ from what’s stated in Empower snacks business plan. Take into account that expenses are usually more predictable than revenue because many are relatively fixed one of the largest expense to consisted is payroll. When unitizing the start-ups cost separate the onetime upfront costs needed before Empower starts production from Empower snacks ongoing operating expenses.
When analyzing 12 month projections profit and loss Empower average reserves should be between $1,200 – 1,600. 00 months. For detail information refer to start-up cost under reserves. Sales Projection According to” IBISWorld Industry Report snack food producer are expected to introduce more nutritious extensions to entice heal-conscious consumers. The snack Food industry is in the growth stage of its life cycle. IBISWorld Industry states over next 10 years the industry is projected to increase an annualized rate of 5. % and GDP forecast to grow 2. 5% per year on average over the 10 year period. (Osto, Max) Based on number of healthconscious Americans is also anticipated to grow, which will increased Empower Snacks revenues also increase competitions as this will encourage the competitor to introduce more healthy varieties of chips, pretzels and popcorn, as well as new and innovative snack goods.
According to IBISWorld Industry report “overall, industry revenue is expected to increase at an average annual rate of 3. 6% to $44. billion in the five years to 2020, beginning with 4. 2% growth over 2016. ” Based on the projections sales for the first 12 months of Empower snacks will have larger increase than the national average due to the company is being establish in the first 5 years. Empower snacks will gain recognition through marketing, this will assist with establishing there product. Projections of sales in the first 12 months are projected to start with 50 units and to increase by 50 unit each month. The next 5 years sales are projected to increase 10% each year after.
Break-Even Analysis When you’re observing the breakeven point Empower snacks will have figured two scenarios. The first scenario is based on having a supervisor at a lower rate at about $12 an hour. The production labor will be based of $1. 22 a unit. This figure is based on doing 150 units in about 8 hours with two employees one at $9. 25 rate and other at $11-$12 hourly rate. The sales labor is based off of two employees selling 150 units in 5 hours or one employee selling in 10 hours this can be broken up in different days, does not have to be 5 consecutive hours.
Packaging is based off. 33 unit with one person packaging 150 units in about 5 1/2 hours. Packaging supplies are estimated at $0. 40 per unit, this include brown bag packing at $12 for 50 count total . 24 per unit with Vacuum seal bag at. 16 per unit. Then transportation is calculated at $0. 09 a unit for every hundred and 150 units it will totally $13. 50 per batch of 150 units to transport units to location to sell. Fixed costs are based on business license and equipment. Although equipment is one time purchase empower snack will continue to grow.
Thru this growth Empower snacks will need to purchase new equipment to keep up with supply and demand. Therefore for new equipment budget it is essential to retain at least a $500 budget fixed cost so empower snack have the ability to buy new equipment each year in the first five years. The difference between scenario 1 & 2 is the production labor is estimated at a lower cost due to partaking in a higher paid supervisor for Empower Snacks. This would include a 12 hour week of Amanda’s time delegated to the Empower snacks production and sales.
This breakeven point will include Amanda salary at 12 hours a week with portion of Amanda’s annual salary of $13,335 delegated to Empower Snacks fix cost . Although the production rate decrease to $0. 60 per unit for each sales and production labor. The overall fixed cost increase dramatically producing the breakeven point of units being 14785 units’ verses 3723 units in scenario 1. When comparing both scenarios the most practicable scenario to breakeven with a realistic amount that Empower snacks can produce would be scenario 1 with a higher level supervisor at 11 to $12 an hour.
