Financial Projections and Break-Even Analysis for Power Brick Product

Entrepreneurship 1
Entrepreneurship and New Venture Management
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Entrepreneurship 2
 Projected Break Even point for Power brick product
The Power Brick product will be sold at $34 per unit. The total fixed cost associated with the
product is $ 122,500.00. Likewise, the expected variable cost per unit is $6 (English, 2011, p.
41); (Tjia, 2009, p. 61). Therefore, the Break-Even unit of the product is calculated as shown
below;
Units Required for Break-
Even: 4,375
Dollar Sales Required for Break-Even: $148,750.00
Variable Costs Per Unit: $6.00
Total Variable Costs: $26,250.00
Total Fixed Costs: $122,500.00
Months to Break-Even: N/A
At $ 34 selling price per unit, the business will be required to sell 4,375 to break even which
is equivalent to a break-even sale of $ 148,750. The total variable cost associated with the
product is $ 26, 250 while the total fixed cost is $ 122,500 (Tracy, 2012, p. 67); (Kaplan,
2012, p. 205).

Entrepreneurship 3
 Financial projections
Financial Projections help the business to understand its future financial situations clearly.
The projections also help the company to put strategic plans that would help is to achieve its
full potential. Financial projections include the expected income statement, expected balance
sheet, expected cash flow, and expected ratio analysis (Samonas, 2015, p. 113); (Delaney,
2010, p. 98).
a) Pro forma income statement
Year 1 Year 2 Year 3
Sales $300,000 $390,000 $550,000
Costs/Goods Sold $175,000 $200,000 $300,000
GROSS PROFIT
OPERATING EXPENSES
$125,000 $190,000 $250,000
Salary (Office & Overhead) $30,000 $35,000 $40,000
Payroll (taxes, etc.)
Outside Services
Supplies (Office & Operation) $5,000 $5,500 $7,000
Repairs & Maintenance $1,000 $1,000 $1,000
Advertising $3,000 $3,300 $3,700
Car, Delivery & Travel $2,000 $4,000 $10,000
Accounting & Legal $1,000 $1,000 $1,000
Rent $2,000 $2,000 $2,000
Telephone $1,000 $1,200 $1,500
Utilities $4,000 $6,000 $9,000
Insurance $2,000 $2,000 $2,000
Taxes (Real Estate, etc.) $0 $0 $0
Interest $2,000 $2,500 $3,000
Depreciation $4,000 $4,000 $4,000