Delia!s D nuts
Lisa Scotti Jeremy Paredes Ashleigh Blumer Danny Shepelwich Emily Gentry
Executive Overview After reviewing Delia’s financial situations, we have come to conclusions that will help her in the present and the future. First, we recommend that Delia should purchase four donut machines. This will produce excess capacity and reduce her overall expenses. Next, Delia should follow through with the computer equipment purchase. This decision will increase productivity and help will her financial bookkeeping. Considering the South side store, we do not recommend opening one until we lower sales commission and raise charitable price per unit. This will make the North side store profitable. Based on our projections and analysis, we also suggest that Delia begin selling donuts at C-stores. Selling donuts at 40 C-store accounts will provide a 37% net profit margin. In conclusion, Delia’s health-care costs will be reduced based on the recommendations we have suggested.
Delia!s D nuts
Question 1 Should Delia’s proceed with the purchase of the donut making machinery? Why or why not?
Delia!s D nuts
Should Delia’s proceed with the purchase of the donut making machinery? Why or why not? • • • • •
•
Yes, Delia should proceed with the purchase of the donut making machinery. We suggest that Delia fire all 30 bakers. Delia should replace the bakers by purchasing 4 machines (1 machine working at 25% capacity; all others at full capacity). With 4 machines, Delia will be able to make enough donuts based on actual 2009 sales (retail and charitable). Key numbers: o Total Cost (3.25 machines; includes annual depreciation for 4 machines, salary for 9 machine operators, operators insurance, operators workmen’s comp, COGS, warranty cost for one year for 3 machines, maintenance cost for one machine for one year, property and casualty insurance) = $2,067,219 See Exhibits 1-10: o 1: How many donuts were sold in 2009? o 2: How many machines do we need to make in 2009? o 3: How much is health insurance and workman’s compensation? o 4: How much do machine maintenance and warranty cost per year? o 5: What will the COGS be if we use machines? o 6: What will Property & Causality Insurance cost if we use machines? o 7: How much do 3.25 machines cost? o 8: How much does it cost to run a machine at 25% capacity? o 9: How much would it cost to pay 7 bakers in 2009? o 10: Is it less expensive to purchase machines or hire bakers?
Delia!s D nuts
Exhibit 1 How many donuts we sold in 2009 2009 Total Retail Donuts Sold Total 2009 Retail Sales
$775,500
Frosted Percentage
60%
Frosted Retail Sales
$465,300
Frosted Retail Unit Price
$0.625
Frosted Retail Total Units Sold
744,480
Filled Percentage
40%
Filled Retail Sales
$310,200
Filled Retail Unit Price
$0.75
Filled Retail Total Units Sold
413,600
Total Retail Units Sold
1,158,080
2009 Total Charity Donuts Sold Total 2009 Charity Sales
$3,033,071.00
Charity Price Per Dozen
$6.50
Charity Price Per Unit
$0.54
Total Charity Units Sold
5,616,798
TOTAL 2009 UNITS SOLD
6,774,878
Delia!s D nuts
Exhibit 2 How many machines do we need to make donuts in 2009? Calculations for # of machines for Retail/Charity donuts sold in 2009
6,774,879
# of donuts (1) machine can make
2,085,610
machines needed to make 2009 donuts
3.25
Delia!s D nuts
Exhibit 3 How much is health insurance and workman’s compensation per employee? Number of Employees 8 packaging and shipping people 30 bakers 1 packing and shipping manager 6 office staff 1 delia 46 full-time total in 2009 14 part time employees 60 total employees (both F/T and P/T) in 2009
Number of part time retail employees 2 employees to staff retail at all times 18 hours per day to staff 7 days per week 252 total number of hours needed to staff per week 40 hours per full-time employee 7 full-time employees needed to staff per week 14 part-time employees needed to staff per week
Delia!s D nuts
Exhibit 3 Continued Number of Bakers 7 bakers per shift 3 shifts per day 8 hours per shift 7 days per week 1,176 total number of hours needed to staff per week 40 hours per full-time employee 30 full-time bakers needed to staff one week Health Insurance and Workman's Compensation Calculations $171,429 total health insurance per year $3,727 health insurance per employee $40,000 workman's comp per year $667 Workman's comp per person per year
Assumptions Full time employees work 40 hours per week Doubled number of full-time workers needed to translate into part-time workers Only full-time employees get health insurance All full-time and part-time employees get workman's compensation All retail employees are part-time employees
Delia!s D nuts
Exhibit 4 How much do machine maintenance and warranty cost per year? Maintenance Costs per year $1,000 cost per month 12 months per year $12,000 total costs per year
Warranty Costs per year $650 cost per month in first (2) years $850 cost per month in last (3) years $15,600 total costs for the first (2) years $30,600 total costs for the last (3) years $46,200 Total for (5) years $92,400 Total for (10) years $9,240 Blended rate per year
Delia!s D nuts
Exhibit 5 What will the COGS be if we use machines? New COGS due to Machines 2009 COGS
$2,398,571
labor costs (55% of total COGS)
$1,319,214
COGS - Bakers Labor
$1,079,357
Rent COGS - Rent
$35,000 $1,044,357
10% of COGS (due to machine efficiencies)
$104,436
New COGS due to savings
$974,921
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Exhibit 6 What will Property & Causality Insurance cost if we use machines? New Property and Casualty Insurance Costs Calculations Property and Casualty Insurance 2009 Costs
$8,571
Percentage Increase due to Machinery
15%
New Property and Casualty Insurance Costs due to Machinery
$9,857
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Exhibit 7 How much do 3.25 machines cost? Full-Time Machine Calculations
Annual Depreciation
(1)
(3)
machine
machines
$10,000
$30,000
$262,800
$788,400
$33,540
$100,621
Staff Workman's Compensation
$6,000
$18,000
Warranty Costs
$9,240
$27,720
$12,000
$0
$333,580
$964,741
Staff Costs ((2) workers x 24 hours x $15/hour x 365 days) Staff Health Insurance ((2) workers per shift x (3) shifts x (8) hours/shift x (7) days per week / (40) hours for full-time employment)
Maintenece Costs TOTAL Total Costs for 3.25 Machines Total Costs for (3) machines Total Costs for (1) machine at 25% capacity Total COGS Total Rent Total Property & Casualty Insurance Total Costs for 3.25 Machines
$964,741 $82,700 $974,921 $35,000 $9,857 $2,067,219
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Exhibit 8 How much does it cost to run a machine at 25% capacity? Number of Part-Time Machine Operators 2 employees to run machine 6 hours per day 7 days per week 84 total number of hours needed to staff per week 40 hours per full-time employee 3 full-time employees needed to staff per week 6 part-time employees needed to staff per week
Part-Time Machine Calculations (1) Machine at 25% Capacity Annual Depreciation
$10,000
Staff Costs ((2) workers x (6) hours a day x
$65,700
$15/hour x 365 days) Staff Health Insurance
$0
Staff Workman's Compensation (6 staff) Warranty Costs
$4,000 $0
Maintenece Costs
$3,000
TOTAL
$82,700
Assumption Running a machine at 25% capacity reduces maintenance costs by 75%
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Exhibit 9 How much would it cost to pay 7 bakers to make 2009 donuts? Bakers Cost Calculations Bakers Salary Bakers Health Insurance Bakers Workman's Compensation Total COGS Property & Casualty Insurance TOTAL
$1,079,357 $111,802 $20,000 $1,079,357 $8,571 $2,538,944
Note: COGS includes cost of donuts outsourced due to insufficient production
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Exhibit 10 Is it less expensive to purchase machines or hire bakers? Machines vs. Bakers Cost Comparison Total Costs for Bakers
$2,538,944
Total Costs for Machines
$2,067,219
Savings due to Machines
$471,724
Delia!s D nuts
Question 2 Should Delia’s proceed with the purchase of the computer equipment? Why or why not?
Delia!s D nuts
Should Delia’s proceed with the purchase of the computer equipment? Why or why not? • • • • •
•
Yes, Delia should proceed with the purchase of the computer equipment. It is cheaper to have one computer and one new employee than it is to have 3 employees with no computer. Buying computer equipment would increase productivity by at least 25% which is equivalent to 2.5 people (.25 x 6 current office staff = 1.5 people) To reach the goal of the increased staff of 2.5 people, we would need to purchase one computer and one office worker. Key numbers: o Total Cost (one machine and one person annually) = $60,560 o 3 Office Workers= $88,680 o Delia will save = $27,788 See Exhibits 1 -5: o 1: How does a computer increase productivity and by how much? o 2: How much does it cost to hire 3 people? o 3: How much does it cost to purchase a machine? o 4: How much does it cost to hire 1 person? o 5: Is it less expensive to hire 3 people than 1 computer and 1 person?
Delia!s D nuts
Exhibit 1 How does a computer increase productivity and by how much? Productivity Calculations 25%
Guaranteed productivity increase by purchasing a computer
6
Current number of staff
1.5
Equivalent number of staff added if productivity is increased by 25%
Assumption Equivalent staff increase due to computer productivity will not be rounded up
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Exhibit 2 How much does it cost to hire 3 people? Staffing Calculations Salary
$75,000
Health Insurance
$11,181
Workman's Compensation TOTAL COSTS PER YEAR
$2,001 $88,182
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Exhibit 3 How much does it cost to purchase a machine? Computer Calculations Annual depreciation for computer
$25,000
Computer maintenance per year
$6,000
TOTAL COSTS PER YEAR
$31,000
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Exhibit 4 How much does it cost to hire 1 person? Staffing Calculations Salary Health Insurance Workman's Compensation TOTAL COSTS PER YEAR
$25,000 $3,727 $667 $29,394
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Exhibit 5 Is it less expensive to hire 3 people than 1 computer and 1 person? Staff vs. Computer Comparison Total Costs for (3) people
$88,182
Total Costs for computer and person
$60,394
Savings due to computer and person
$27,788
Delia!s D nuts
Question 3 Should Delia’s proceed with the opening of the new South side store? Why or why not?
Delia!s D nuts
Should Delia’s proceed with the opening of the new South side store? Why or why not? • •
•
•
• •
Based on the information, we cannot formally draw a conclusion. We do not have enough data to confidently recommend opening a south side store because of the following assumptions: o We will not cannibalize sales from the North side store. o We will reach expected sales based on 2009 retail sales. Also, Delia should not open a South side store location until she considers the following: o Increasing charity by $0.04 per donut o Decreasing sales commission by 2% We cannot conclude if there is a manufacturing space in the new South side store. Based on this, if Delia were to open a new South side store, we suggest only making it a retail store because we are losing money at the North side store in charity. Key numbers: o Gross Profit (if she were to open a retail only store) = $219,781 See Exhibits 1- 9: o 1: How much will the South side store sell? o 2: How many machines will we need to purchase to make projected sales? o 3: How much will production cost from projected sales? o 4: What are the non-production expenses for the South side store? o 5: What will the South side store’s net profit be? o 6: How are the increases in charitable sales affecting our bottom line? o 7: What additional revenue can we gain by decreasing sales commission to the 2008 level? o 8: What additional revenue can we gain by increasing price by $0.04 per charity unit sold? o 9: How will these additional revenue affect our bottom line?
Delia!s D nuts
Exhibit 1 How much will the South side store sell? Projected Sales (based on 2009 retail data) Total 2009 Retail Sales
$775,500
Frosted Percentage
60%
Frosted Retail Sales
$465,300
Frosted Retail Unit Price Frosted Retail Total Units Sold
$0.625 744,480
Filled Percentage
40%
Filled Retail Sales
$310,200
Filled Retail Unit Price Filled Retail Total Units Sold Total Retail Units Sold
$0.75 413,600 1,158,080
Delia!s D nuts
Exhibit 2 How many machines will we need to purchase to make projected sales? Calculations for # of machines for South Side Store Projected Unit Sales
1,158,080
# of donuts (1) machine can make
2,085,610
Machines needed to make projected sales
0.56
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Exhibit 3 How much will production cost for projected sales? COGS Per Unit Calculations 2009 COGS
$2,398,571
Bakers Labor
$1,319,214
Manufacturing Rent
$35,000
COGS - Labor - Rent
$1,044,357
Number of donuts sold in 2009
6,774,879
COGS per unit
$0.15
Total COGS based on Projected Sales COGS per unit
$0.15
Projected Unit Sales
1,158,080
Total COGS based on Projected Sales
$178,520
Part-Time Machine Calculations (1) Machine at 56% Capacity Annual Depreciation Staff Costs ((2) workers x (13) hours a day x
$10,000 $142,350
$15/hour x 365 days) Staff Health Insurance Staff Workman's Compensation (10 staff) Warranty Costs Maintenance Costs TOTAL
$0 $6,670 $0 $6,720 $165,740
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Exhibit 3 Continued Total Production Costs Total COGS
$178,520
Total Machine Costs
$165,740
Total Production Costs
$344,260
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Exhibit 4 What are the non-production expenses for the South side store? Part-Time Retail Staff Needed 2 employees to staff retail at all times 18 hours per day to staff 7 days per week 252 total number of hours needed to staff per week 40 hours per full-time employee 7 full-time employees needed to staff per week 14 part-time employees needed to staff per week
Part-Time Retail Staff Calculations Number of hours per day to staff
14
Hourly rate
$15
Retail Salaries per year
$76,650
Health Insurance
$0
Workman's Compensation @ $667 per employee
$9,338
Rent Calculations North Side Store Rent per year South Side Rent Difference South Side Rent Total per year
$24,000 35% $15,600
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Exhibit 4 Continued Allocation Percentage Calculations (by square feet) Total Square Feet
Allocated Percentage
Retail
2,400
19%
Pack/Ship
2,000
16%
Sales
1,000
8%
Manufacturing
7,000
56%
12,400
100%
TOTAL
Retail G&A Expenses based on Allocation by square feet Total Costs at
Retail Allocation
North Side
(19% of total cost)
Property & Casualty Insurance
$8,571
$1,628
Product Liability
$6,429
$1,222
Telephone
$8,571
$1,628
Extermination
$6,429
$1,222
$30,000
$5,700
General Maintenance
Property & Casualty Insurance Calculations due to Machinery Property and Casualty Insurance
$1,628
Percentage Increase due to Machinery
15%
New Property and Casualty Insurance Costs due to Machinery
$1,873
Delia!s D nuts
Exhibit 4 Continued South Side Non-Production Expenses Rent Utilities Salaries - Retail
$15,600 $8,571 $76,650
Retail Workman's Compensation
$9,338
Supplies
$6,429
Property & Casualty Insurance
$1,873
Product Liability
$1,222
Telephone
$1,628
Extermination
$1,222
General Maintenance
$5,700
TOTAL NON-PRODUCTION EXPENSES
$128,232
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Exhibit 5 What will the South side store’s net profit be? South Side Store Projected Income Statement Projected Gross Sales
$775,500
Projected COGS
$178,520
Projected Gross Profit
$596,980
Projected Expenses Rent
$15,600
Utilities
$8,571
Salaries - Retail
$76,650
Retail Workman's Compensation
$9,338
Supplies
$6,429
Property & Causality Insurance
$1,873
Product Liability
$1,222
Telephone
$1,628
Extermination
$1,222
General Maintenance
$5,700
Annual Machine Depreciation
$10,000
Salaries - Production
$142,350
Production Staff Workman's Compensation
$6,670
Maintenance Costs
$6,720
Projected Total Expenses
$293,972
PROJECTED NET PROFIT
$303,008
Delia!s D nuts
Exhibit 6 How are the increases in charitable sales affecting our bottom line? Total Sales 2005
2006
2007
2008
2009
Retail
$375,000
$633,500
$810,000
$814,500
$775,500
Charitable
$300,000
$750,500
Total
$675,000
$1,336,000 $1,578,600 $3,033,071
$1,384,000 $2,146,000 $2,393,100 $3,808,571
Percentage of Total Sales 2005
2006
2007
2008
2009
Retail
56%
46%
38%
34%
20%
Charitable
44%
54%
62%
66%
80%
2008
2009
Changes in Sales Commission 2005 Charitable
2006
2007
$300,000 $750,500 $1,336,000 $1,578,600 $3,033,071
Sales Sales
$4,750
$13,575
$27,000
$49,775
$151,654
2%
2%
2%
3%
5%
Commission Sales Commission Percentage
Difference in Revenue Price per dozen
Plain Retail
Plain Charitable
$7.50
$6.50
Difference
$1.00
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Exhibit 7 What additional revenue can we gain by decreasing sales commission to the 2008 level? Commissions Comparison 2009 Charitable Sales
5% Commission
3% Commission
$3,033,071
$151,654
$90,992
Difference
$60,661
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Exhibit 8 What additional revenue can we gain by increasing price by $0.04 per charity unit sold? 2009 Total Charity Donuts Sold Total 2009 Charity Sales
$3,033,071.00
Charity Price Per Dozen
$6.50
Charity Price Per Unit
$0.54
Total Charity Units Sold
5,616,798
Increased Price Calculations Charity Price Per Unit
$0.54
Price Increase
$0.04
New Price Per Unit
$0.58
Charity Price Per Dozen
$6.96
Total 2009 Charity Units Sold Total Charity Sales Additional Revenue due to price increase
5,616,798 $3,257,743 $224,672
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Exhibit 9 How will these additional revenue affect our bottom line? Additional Revenue Calculations Revenue from decreasing commission
$60,661
Revenue from price increase
$224,672
Total Additional Revenue
$285,333
2009 Budget due to changes 2009 Net Income Loss
-$150,464
Sales Manager
$40,000
Sales Manager Commissions (1% of new sales)
$32,577
Additional Revenue
$285,333
2009 Budget due to changes
$62,292
Assumptions Price increase will keep charitable demand stagnant (i.e. sales will stay the same) Decreased commission will not affect sales due to sales manager hired
Delia!s D nuts
Question 4 Should Delia’s begin selling donuts to C-stores? Why or why not? If yes, how?
Delia!s D nuts
Should Delia’s begin selling donuts to C-stores? Why or why not? If yes, how? • •
•
•
Yes, Delia should being selling donuts to C-stores because it yields a 60% margin at 40 accounts (at 80 accounts, profit margin goes down 2%). We considered the same assumptions that were made for opening a new South side store (listed above in Question 3). However, the profit margin is so high that it is going to make Delia money. Key numbers: o 37% net profit margin (40 accounts) o 35% net profit margin (80 accounts) See Exhibits 1-8: o 1: What are the projected sales for 40 accounts? o 2: How many unites would we need to produce in order to reach project sales? o 3: How many machines and bakers would we need to meet projected unit sales? o 4: What are the non-production related expenses for 40 accounts? o 5: What are the production related expenses for 40 accounts? o 6: What are the total projected expenses for the 40 accounts? o 7: What is the projected net income for 40 accounts? o 8: What is the projected net income for 80 accounts?
Delia!s D nuts
Exhibit 1 What is the projected sales for 40 accounts? Projected Sales for 40 Accounts Fall/Winter Cost per dozen
$6
# of dozen sold per day in Fall/Winter
12
sales per week # of weeks in Fall/Winter Total Fall/Winter Sales
$525 24 $12,600
Spring/Summer Cost per dozen
$6
# of dozen sold per day in Spring/Summer
10
sales per week # of weeks in Spring/Summer
$438 24
Total Spring/Summer Sales
$10,500
Total Annual Sales for (1) Account
$23,100
Number of Accounts for (1) F/T Sales Staff TOTAL PROJECTED SALES
40 $924,000
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Exhibit 2 How many units would we need to produce in order to reach projected sales? Projected Units Sold Calculations Fall/Winter # of dozen sold per day in Fall/Winter
12
# of units per dozen
12
days per week
7
weeks per month
4
total months
6
Total Fall/Winter Units Sold
24,192
Spring/Summer # of dozen sold per day in Spring/Summer
10
# of units per dozen
12
days per week
7
weeks per month
4
total months
6
Total Spring/Summer Units Sold
20,160
Total Annual Units Sold for (1) Account
44,352
Number of Accounts for (1) F/T Sales Staff TOTAL PROJECTED UNITS SOLD
40 1,774,080
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Exhibit 3 How many machines and bakers would we need to meet projected unit sales? Total Donuts made by Machines # of donuts (1) machine can make
2,085,610
Total Number of Machines Owned
4
Maximum capacity of donut production
8,342,440
Donuts needed for Retail/Charity
6,774,879
Excess Inventory
1,567,561
Projected Units needed for (40) Accounts
1,774,080
Difference
-206,519
Donuts per baker per shift Donuts made per week
125,000
Days Per Week
7
# of shifts per day
3
# of bakers per shift
7
Donuts made per baker per shift
850
Part-Time Baker Hours # of donuts made by hand
206,519
# of donuts needed per day
566
Donuts made per baker per shift
850
Productivity Needed # of hours per shift Number of hours needed per day
67% 8 5.3
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Exhibit 3 Continued Number of Part-Time Bakers Bakers per shift
1
Shifts per day
1
Hours per shift
5.3
Days per week
7
Total number of hours needed to staff per week
37
Hours per full-time employee
40
Total number of part-time bakers needed
1
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Exhibit 4 What are the non-production related expenses for 40 accounts? Non-Production Related Expenses for 40 Accounts Salary - (1) F/T Staff Sales Health Insurance Sales Workman's Compensation Commission (1% of sales)
$25,000 $3,727 $667 $9,240
Annual Depreciation on Van
$12,000
TOTAL SALES EXPENSES
$50,634
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Exhibit 5 What are the production related expenses for 40 accounts? Full-Time Machine Calculations (1) machine (4) machines Annual Depreciation
$10,000
$40,000
Staff Costs ((2) workers x 24 hours x $15/hour x
$262,800
$1,051,200
$33,540
$134,162
Staff Workman's Compensation
$6,000
$24,000
Warranty Costs
$9,240
$36,960
Maintenance Costs
$12,000
$0
TOTAL
$333,580
$1,286,322
365 days) Staff Health Insurance ((2) workers per shift x (3) shifts x (8) hours/shift x (7) days per week / (40) hours for full-time employment)
Machine Costs Allocation based on Productivity Costs for 3.25 Machines for Retail/Charity
$1,047,441
Costs for (4) Machines
$1,286,322
Costs allocated towards C-Store production
$238,880
Bakers Cost Calculations Bakers Hourly Rate
$15
Hours Per Day
5.3
Bakers Annual Salary Health Insurance Bakers Workman's Compensation TOTAL BAKERS EXPENSES
$29,018 $0 $667 $29,705
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Exhibit 5 Continued C-Store COGS Total Projected Units Sold
1,774,080
COGS/unit
$0.15
TOTAL C-STORE COGS
$266,112
Production Related Expenses Costs allocated towards C-Store production Total Part Time Bakers Expenses TOTAL PRODUCTION EXPENSES
$238,880 $29,705 $268,585
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Exhibit 6 What are the total projected expenses for the 40 accounts? Projected Expenses for (40) Accounts Non-Production Related Expenses
$50,634
Production Related Expenses
$268,585
TOTAL EXPENSES
$319,219
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Exhibit 7 What is the projected net income for 40 accounts? C-Store Projected Income Statement (for 40 accounts) Projected Sales
$924,000
Projected COGS
$266,112
Projected Gross Profit
$657,888
Projected Expenses Salary - (1) F/T Staff
$25,000
Sales Health Insurance
$3,727
Sales Workman's Compensation
$667
Commission (1% of sales)
$9,240
Annual Depreciation on Van
$12,000
Machine Costs allocated towards C-Store
$238,880
production Bakers Annual Salary Health Insurance Bakers Workman's Compensation
$29,018 $0 $667
Total Projected Expenses
$319,219
PROJECTED NET INCOME
$338,669
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Exhibit 8 What is the projected net income for 80 accounts? Total Donuts made by Machines # of donuts (1) machine can make
2,085,610
Total Number of Machines Owned
4
Maximum capacity of donut production
8,342,440
Donuts needed for Retail/Charity
6,774,879
Excess Inventory
1,567,561
Projected Units needed for (80) Accounts
3,548,160
Difference
-1,980,599
Total Number of Machines Needed for Difference Donuts Needed
1,980,599
# of donuts (1) machine can make
2,085,610
Machines Needed
1
Total Number of Machines needed for (80) Accounts
5
Full-Time Machine Calculations (1) machine (5) machines Annual Depreciation
$10,000
$50,000
Staff Costs ((2) workers x 24 hours x $15/hour x
$262,800
$1,314,000
$33,540
$167,702
Staff Workman's Compensation
$6,000
$30,000
Warranty Costs
$9,240
$46,200
Maintenece Costs
$12,000
$0
TOTAL
$333,580
$1,607,902
365 days) Staff Health Insurance ((2) workers per shift x (3) shifts x (8) hours/shift x (7) days per week / (40) hours for full-time employment)
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Exhibit 8 Continued Machine Costs Allocation based on Productivity Costs for 3.25 Machines for Retail/Charity
$1,047,441
Costs for (5) Machines
$1,607,902
Costs allocated towards C-Store production
$560,461
Net Income Margin Comparisons 40 Accounts
80 Accounts
Projected Sales
$924,000 $1,848,000
Projected COGS
$266,112
Projected Gross Profit
$657,888 $1,315,776
$532,224
Projected Expenses Salary - (1) F/T Staff
$25,000
$50,000
$3,727
$7,454
$667
$1,334
$9,240
$18,480
$12,000
$24,000
$238,880
$560,461
$29,018
$0
$0
$0
$667
$0
Total Projected Expenses
$319,219
$661,729
Projected Net Income
$338,669
$654,047
37%
35%
Sales Health Insurance Sales Workman's Compensation Commission (1% of sales) Annual Depreciation on Van Machine Costs allocated towards CStore production Bakers Annual Salary Health Insurance Bakers Workman's Compensation
PROJECTED NET INCOME MARGIN
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Question 5 How can the company begin to reign in its health-care costs?
Delia!s D nuts
How can the company begin to reign in its health-care costs? •
•
Saving money by: o We are firing full time staff o We are purchasing machines o The part-time employees that will be hired will not be given health care See Exhibits 1-2: o 1: What would our health insurance numbers be if we didn’t recommend C-store or Sales Manager additions? o 2: What percentage of expenses is health care taking up with C-store and Sales manager additions?
Delia!s D nuts
Exhibit 1 What would our health insurance numbers be if we did not recommend C-Store or Sales Manager additions? Comparison of Full-Time Employees (No C-Stores or Computer/Office Staff Increase) 2009
2010
Packing & Shipping
8
8
Packing & Shipping Manager
1
1
30
0
Office Staff
6
6
Delia
1
1
Sales Manager
0
0
Sales - C-Store
0
0
Machine Labor
0
27
46
43
Bakers
TOTAL FULL TIME EMPLOYEES
Health Care Costs Comparison
Health Care Costs Expenses Percentage of Expenses
2009
2010
Differences
$171,429
$160,261
-$11,168
$1,042,900
$2,801,978
$1,759,078
16%
6%
-11%
Delia!s D nuts
Exhibit 2 What percentage of expenses is health-care taking up with C-Store and Sales Manager additions? Comparison of Full-Time Employees 2009
2010
Packing & Shipping
8
8
Packing & Shipping Manager
1
1
30
0
Office Staff
6
7
Delia
1
1
Sales Manager
0
1
Sales - C-Store
0
1
Machine Labor
0
36
46
55
Bakers
TOTAL FULL TIME EMPLOYEES
Health Care Costs Comparison
Health Care Costs Expenses Percentage of Expenses
2009
2010
Differences
$171,429
$204,985
$33,556
$1,042,900
$2,801,978
$1,759,078
16%
7%
-9%
Delia!s D nuts
2009 Monthly Budget Jan.
Feb.
March
April
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
Total
677488
677488
677488
677488
609739
406493
338744
270995
406493
677488
677488
677488
6,774,879
Retail Sales
77550
77550
77550
77550
69795
46530
38775
31020
46530
77550
77550
77550
775,500
Charitable
303307
303307
303307
303307
272976
181984
151654
121323
181984
303307
303307
303307
3,033,071
Total
380857
380857
380857
380857
342771
228514
190429
152343
228514
380857
380857
380857
3,808,571
239857
239857
239857
215871
143914
119929
95942.8 143914
239857
239857
239857
2,398,571
239857
141000
141000
141000
126900
84600
70500
56400
84600
141000
141000
141000
1,410,000
Salaries-Retail
8928
8928
8928
8928
8928
8928
8928
8928
8928
8928
8928
8928
107,143
Salaries-Pack/Ship
16070
16070
16070
16070
16070
16070
16070
16070
16070
16070
16070
16070
192,851
Salaries-Office
13392
13392
13392
13392
13392
13392
13392
13392
13392
13392
13392
13392
160,714
Salary-Pack/Ship Mgr.
5357
5357
5357
5357
5357
5357
5357
5357
5357
5357
5357
5357
64,286
Salary-Delia
13392
13392
13392
13392
13392
13392
13392
13392
13392
13392
13392
13392
160,714
Payroll Taxes
5952
5952
5952
5952
5952
5952
5952
5952
5952
5952
5952
5952
71,428
Workers Comp. Insurance
3333
3333
3333
3333
3333
3333
3333
3333
3333
3333
3333
3333
40,000
Health Insurance
14285
14285
14285
14285
14285
14285
14285
14285
14285
14285
14285
14285
171,429
Sales Commission
15,165
15165.3 15165.3 15165.3 13648.8 9099.18 7582.65 6066.12 9099.18 15165.3 15165.3 15165.3 151,653
Rent-Retail
2000
2000
2000
2000
2000
2000
2000
2000
2000
2000
2000
2000
24,000
Rent-Pack/Ship
842
842
842
842
842
842
842
842
842
842
842
842
10,114
Rent-Office
1250
1250
1250
1250
1250
1250
1250
1250
1250
1250
1250
1250
15,000
Utilities-Retail
714
714
714
714
714
714
714
714
714
714
714
714
8,571
Utilities-Pack/Ship
952
952
952
952
952
952
952
952
952
952
952
952
11,429
Utilities-Office
214
214
214
214
214
214
214
214
214
214
214
214
2,571
Supplies-Retail
535
535
535
535
535
535
535
535
535
535
535
535
6,429
Supplies-Pack/Ship
7142
7142
7142
7142
7142
7142
7142
7142
7142
7142
7142
7142
85,714
Supplies-Office
714
714
714
714
714
714
714
714
714
714
714
714
8,571
Prop & Casualty Insurance 714
714
714
714
714
714
714
714
714
714
714
714
8,571
Product Liability Insurance
535
535
535
535
535
535
535
535
535
535
535
535
6,429
Licenses and Taxes
476
476
476
476
476
476
476
476
476
476
476
476
5,714
Telephone
714
714
714
714
714
714
714
714
714
714
714
714
8,571
Extermination Expense
535
535
535
535
535
535
535
535
535
535
535
535
6,429
General Maintenance
2500
2500
2500
2500
2500
2500
2500
2500
2500
2500
2500
2500
30,000
Advertising
3750
3750
3750
3750
3750
3750
3750
3750
3750
3750
3750
3750
45,000
Depreciation
9523
9523
9523
9523
9523
9523
9523
9523
9523
9523
9523
9523
114,286
Professional Fees
3570
3570
3570
3570
3570
3570
3570
3570
3570
3570
3570
3570
42,847
Total Expense
156046
156046
156046
156046
140442
93627.8 78023.2 62418.6 93627.8 156046
156046
156046
1,560,464
Net Income before taxes -15046
-15046
-15046
-15046
-13542
-9027.8
-15046
-15046
-150464
# Donuts Sold (est.)
Revenue:
COGS (incl. labor) Gross Profit
Expenses:
-7523.2
-6018.6
-9027.8
-15046
Delia!s D nuts
2010 Monthly Budget
For the 2010 monthly budget, please refer to the tabloid handout.
Delia!s D nuts