Cost & Cashflow
Direct & Indirect Costs
For clarity, the biggest costs that had the most influence on the selling price are the only ones displayed. These costs are: Advertising, wages, rent and Purchase of raw materials.
period 3
The latter period only sought to increase its lead over the others, so much more was produced and even more shops and employees were hired. Moreover, advertising expenditure was even significantly higher here, as care had to be taken to ensure that the phones remained as well known. A large sum of money was also invested in ADV and TOP advertising. The purpose of this was to make those two models extra outstanding, so that the 15,000 units in both could be sold.
period 2
Costs increase sharply because we realised that if we wanted to sell more, an additional production unit had to be purchased, and more shops and distribution points were also needed. In addition, advertising expenditure is also significantly increased because it was realised that advertising plays a very important role in customer choice, and since production will increase sharply, more is also spent on purchasing raw materials.
Period 1
During this period, costs are very round figures because these were still estimates of how much needed to be spent to get the business up and running.
Cost of goods sold
The cost of goods sold is a very important factor in determining the selling price and profit margins. This is always taken into account a lot when setting the price.
Profit margins and selling price
Selling Price
Profit Margins (%)
Period 1
Profit margins of BAS and GOO are deliberately set lower as price is the most decisive factor in consumer decision here. And at TOP, the profit margin is increased the most as price is the least decisive factor there.
period 2
The BAS profit margin is deliberately kept as low as possible to remain attractive to consumers. For TOP, we try to keep the price around €600 throughout the 3 periods because the other companies on the market either set their price way too high or way too low.
period 3
BAS and GOO prices were aligned with competitors’ prices after the 2nd period, no big profit margins were taken on this. The prices of TOP and ADV were set a little higher, TOP price still close to €600, because all companies will have to incur a lot of extra costs so their prices will automatically be higher, due to the rise in raw material prices and wage increases. Because the BAS is kept as low as possible, a smaller profit margin is taken there so that the price remains under €140.
Expected Cash Flow and Results
Period 1
Period 2
Period 3
Period 1
It was counting on a total sell-out of every product which would eliminate extra inventory and make sales immediately high. With a cash flow of €4,575,038.67 which would immediately put the company ahead of other companies.
period 2
Here a cash flow of €3,203,419.69 is estimated for the sale of everything produced in this period and it is hoped to sell another piece of stock from the previous period, giving a chance to become the market leader. If the marketing strategy on the TOP model is right, our company would have the lowest price with a good profit margin and sell all the stock from that.
period 3
This period saw an estimated operating cash flow of €5,099,091.66. This period the only hope is to increase the lead over other companies in the market. That is why even more fanatic efforts are being made this period to focus on ADV and TOP models, as these generate the most profit. If all the stock would be sold, we would have the best chance of remaining market leader.
Actual Cash Flow and Results
Period 1
Period 1
During this period, costs are very round figures because these were still estimates of how much needed to be spent to get the business up and running.
Period 2
period 2
Costs increase sharply because we realised that if we wanted to sell more, an additional production unit had to be purchased, and more shops and distribution points were also needed. In addition, advertising expenditure is also significantly increased because it was realised that advertising plays a very important role in customer choice, and since production will increase sharply, more is also spent on purchasing raw materials.
Period 3
period 3
The latter period only sought to increase its lead over the others, so much more was produced and even more shops and employees were hired. Moreover, advertising expenditure was even significantly higher here, as care had to be taken to ensure that the phones remained as well known. A large sum of money was also invested in ADV and TOP advertising. The purpose of this was to make those two models extra outstanding, so that the 15,000 units in both could be sold.
