What-if analysisIn general, if the total fixed cost increase, the break-even point will come later and thebreak-even revenue will become greater. After 7 cycles of operation, our break-even point reaches at 3 months with $128,020 revenue. According to the what-if analysis, if we increase our total fixed cost to $250,000, the break-even point will be 6.37 months and with $291,202 revenue. For our microbrew business, the factor that will affect fixed cost are compensation of employees, the utility supply, marketing cost, rent, cost of debt and taxes. To make our business earn more profit, we should make sure that we can lower these fix costs as much as possible.12
AD 715 Term Project- Microbrewery in Kang Ho Dong BaekjeongOPERATIONMANAGEMENTAnalysis of the starting conditionsThanks to the management of Marketing Department and Innovation Department, our company has already performed well before our department (Operation Department) did anything. In detail, as we can see in the Sim-Report, Cycle 4 is the starting condition for our department. In Cycle 4, the total revenue of our company increases year by year (which from $539243 to $864369), the total profit of our company also increases every year (which from $152293 to $283961). The result of Break Even Point is pretty good. In detail, the Break Even Point (Months) is 6, which means company can get back the cost after only 6 months and the Break Even Point (Revenue) is $258047, which means that company can earn back the cost after achieve revenue about $258047. Both the Break Even Point (Months and Revenue) show that company can recover the cost in relatively short time. Focus on the Ending Cash Balance (End of FY-1), the cash balance is positive $2293, that means in this condition, company can earn $2293 at the end of the first year. At the same time, the Internal Rate of Return (IRR) is 104%, which is awesome, and the Net Present Value (NPV) is $398659, which is pretty good compared with our Invested Capital $150000. All the data show that the condition (Cycle 4) our operation department met is good and this condition (Cycle 4) is due to the perfect work from Marketing Department and Innovation Department, they adjusted the variable cost of each product and provide a new product as well as set an appropriate Percent Monthly Demand of Year for this new product.Targeted characteristics for the first three years of operations of the new business unitAs we all know, Marketing Department promote the performance of company by managing from the demand aspect. In other word, Marketing Department tries to expand the market of products and stimulate more demand of customers, so that company can sell more 13
AD 715 Term Project- Microbrewery in Kang Ho Dong Baekjeongproduct to generate more revenue. Innovation Department sometimes does something in the similar aspect. That’s to say that the mission of Innovation Department is to create new products to attract more clients so that customers may buy more products from company.