Electronic Pillbox Logger - Essay Example

Sales Projection
The sales are forecasted for three years from the period of 2012 till 2014. It is assumed that in the year 2012, the number of units sold would be around 100 units at the selling price of $1,000. The number of units sold is expected to increase by 50 units every year. There are also expectations that the prices of the electronic pillbox logger will be increased by 10% due to inflation. The detailed sales projections are outlined in the following table.

Projected Income Statement
The projected income statement of APDM has been formulated on the basis of its performance in the years 2011. All the items on the income statement have been increased by 5% under the current assumption which states that the performance of APDM will remain stagnant throughout the period the next three years as currently there are no bright hopes for the company to perform on a good note. The main area of concern for APDM is the level of discount that they offer to their customers. The amount of discount simply erodes the earnings and causes the company to suffer losses. If the company somehow manages to reduce the level of discounts from thee customers, then there are chances that the company starts performing operations with better profits and come out of the current depressing situation.

The current income statement shows a net loss of $8,695 which is expected to be carried over for the next 3 years as there are no indicators that suggest that there are chances for the company to grow stronger. Under current assumptions, it can be said that the financial performance of APDM will consistently display similar disappointing results. Even with the launches of new devices, the performance of the company would remain below par. The highlights of the income statement are given below:

Breakeven Analysis
If the breakeven analysis of the product is taken into consideration, then it can be observed that under the current assumption of having 100 units sold, the company would be having a net loss of $10,000. This is mainly due to the fixed cost which is quite high and the contribution under the current assumption is just $40,000 which is not enough to cover the fixed cost of $50,000. However, if the breakeven level of sales is taken into account then it can be observed if the total sales of $125,000 are generated, then the company would be in a no-profit, no loss situation because the contribution earned in that situation would become exactly equal to the fixed cost. The breakeven quantity level for producing breakeven sales would be 125 units. The following table highlights the breakeven analysis for the electronic pillbox logger.