It is November and DLI is seeking a $10,000 grant from IDEA's Funding Board to help...

Transcribed Image Text:

It is November and DLI is seeking a $10,000 grant from IDEA's Funding Board to help grow their company, DLI plans to use part of the funds to hire a designer to improve the user experience. The improved user experience on the website will facilitate the process of gaining customers. Currently, "on-boarding" customers takes a longer time because it is necessary to walk customers through their dashbeard. With less time spent on this process, DLI can focus its time on gaining more customers. They also plan to use some of the funds so hire a pregrammer - to develop a sales tool to help DLI reach thousands of businesses that go through company incubators and venture capital fiems DLI also plans to use some of its sales efforts to start strategic partnerships with company incubators to become preferred vendors and be able to reach more startups Ideally, D.I plans to be relevant to physical product companies at every stage of the supply chain. After DLI has built up their user interface and has on-boarded 10 paying customers, they plan to target popular newspapers, magazines and social media platforms to write content about the innovative nature of DLI's business model As part of the funding process, DLI has developed projected sales and expense forecasts, with and without funding. These are displayed in Tables 1 and 2. As part of the stage gale process, DLI has a meeting with the IDEA Board relative to their funding request, strategy and projected business plan. In preparation for the meeting, the DLI team largely current or recently graduated software engineer majors at Northeastern University has asked for your help As a student in DMSB and someone who has successfully completed the managerial accouming course, they know that you can help them prepare for their meeting You think that this is a great opportunity for you to put your managerial accounting skills to work in an advisory role for these entrepreneur. Knowing the power of managerial accounting data, you anticipate the following questions to he asked. You should prepare cogent answers to these questions, drew relevant insights and provide any supporting exhibits and or visualizations that you believe will illumenate your analysis. You should use Excel for your analyses. In your advisory role, you need to prepare DLI to pinch their idea for funding REQUIRED QUESTIONS Describe the industry and the competitors in which DLI is entering. Discuss DLI's strategy to compete in this market 2. In what specific ways-financially-would the grant funding help DLI? How would this be expressed quantitatively? What further questions might you want to ask of this venture (and is there any r types of data that you thek would be useful?) 3. Classify the costs by behavior using number of transactions (customer orders) as the activity. Be sure to provide both quantitative and qualitative support when applicable Does there seem to be an opportunity to substitute fixed for variable costs (or vice vera)? 4. Prepare a contribution margin income statement by month with and without the funding Comment on DLI's cost structure 5. Calculate DLI's breakeven point. How does breakeven with and without the grant financing compare? Show your calculations in detail and provide any assumptions and/or approaches that you took to frame an answer to this potential question posed by the loand Assume grant funding for these questions 6. Which forecasts will the Thoard be most concerned about accuracy and/or not meeting the projections? Why? How should DLI respond to alleviate some of the Board's concem? 7. Prepare a sensitivity analysis (+/- 10%) around the average transactions per customer for the Q1 forecasts (present as a contribution margin income statement) What can you conclude from the tenutivity analysis? Table 1 DASHBOARD LOGISTICS INC (DLI) Sales Data January February March April May June July August September October November December Sales Forecast Sales Pipeline without Funding Qualified Customers (Companies) 112 246 400 800 1200 1600 2000 2400 Interested Customers 40 60 120 240 360 4801 600 Quoted Customers 5 10 16 32 48 64 80 Paying Customers 1 1 2 4 6 8 10 2800 3200 3600 4000 840 960 1080 1200 112 128 144 160 14 16 18 20 Sales Pipeline with Funding Qualified Customers (Companies) 112 246 1000 1400 1800 2200 2600 3000 3400 3800 4200 4600 Interested Customers 40 60 300 420 540 660 780 900 1020 1140 1260 1380 Quoted Customers 5 10 40 56 72 88 104 120 136 152 168 1841 Paying Customers 1 1 5 7 9 11 13 15 17 19 21 23 Monthly Revenue #Customers 1 1 5 7 9 11 13 15 17 19 21 23 Avg Transactions per Customer 1103 1500 2000 2500 3000 3300 3500 4000 4500 4700 4800 5000 Avg Selling Price per Transaction $0.10 $0.50 $0.75 $0.85 $1.00 $1.00 $1.00 $1.00 Total Monthly Revenue $45,500 $60,000 $1.00 $76,500 $1.00 $1.00 $1.00 $89,300 $100,800 $115,000 $110 $750 $7,500 $14,875 $27,000 $36,300 Transactions are orders placed by each customer with DLL. Table 2 DASHBOARD LOGISTICS INC (DLI) Pro Forma Profit and Loss Sales June January February March April May July $7,500 $14,875 $27,000 $36,300 $45,500 $110 $750 Operating Expenses August September October November December Total $60,000 $76,500 $89,300 $100,800 $115,000 $573,635 Executive, Sales, & Misc. Expenses Executive Payroll $2,000 $2,000 $2,000 $4,000 Engineers 50 50 50 50 $6,000 50 $8,000 $8,000 $0 $5,000 Marketing $0 $50 50 50 $0 $0 50 Sales Exp $110 $150 $1,000 $1.750 $2,700 $3,630 $4,550 Servers/Hosting $18 $20 $45 $68 $96 $124 $152 $10,000 $12,000 $12,000 $12,000 $5,000 $83,000 $10,000 $10,000 $10,000 $10,000 $10,000 $55,000 50 $6,000 $6,000 $6,000 $6,000 $24,000 $6,000 $7,650 $8,930 $10,080 $195 $245 $283 $317 $11.500 $58,050 5360 $1,922 Travel Expenses 50 50 $500 $500 $500 $500 $500 Total Executive Expenses 52.129 $2,170 $3,545 $6,318 $9,296 $12,254 $18,202 $500 $1,500 $1,500 $1,500 $26,695 $37,395 $38,713 $39,897 $34,360 $230,972 $1,500 $9,000 Accounting & Legal Expenses Accounting & Legal Payroll 50 50 Rent $2,200 Total Accounting & Legal Expenses $2,200 Total Operating Expenses $2,200 $2,200 $4,329 $4,370 50 $2,200 $2,200 $200 50 50 $200 50 50 $200 $4,000 $4,000 $4,000 $4,000 $4,000 $7,500 $7,500 $7,500 $9,000 $58,100 $4,200 $4,000 $4,000 $4,200 $4,000 $7,500 $7,700 $7,500 $9,000 $58,700 50 50 $600 $5,745 $10,518 $13,296 $16,254 $22,402 $30,695 $44,895 $46,413 $47,397 $43,360 $289,672 Profit Before Interest and Taxes ($4,218) ($3,620) $1,755 $4,358 $13,704 $20,046 $23,099 $29,305 $31,606 $42,887 $53,403 $71,640 $283,963 It is November and DLI is seeking a $10,000 grant from IDEA's Funding Board to help grow their company, DLI plans to use part of the funds to hire a designer to improve the user experience. The improved user experience on the website will facilitate the process of gaining customers. Currently, "on-boarding" customers takes a longer time because it is necessary to walk customers through their dashbeard. With less time spent on this process, DLI can focus its time on gaining more customers. They also plan to use some of the funds so hire a pregrammer - to develop a sales tool to help DLI reach thousands of businesses that go through company incubators and venture capital fiems DLI also plans to use some of its sales efforts to start strategic partnerships with company incubators to become preferred vendors and be able to reach more startups Ideally, D.I plans to be relevant to physical product companies at every stage of the supply chain. After DLI has built up their user interface and has on-boarded 10 paying customers, they plan to target popular newspapers, magazines and social media platforms to write content about the innovative nature of DLI's business model As part of the funding process, DLI has developed projected sales and expense forecasts, with and without funding. These are displayed in Tables 1 and 2. As part of the stage gale process, DLI has a meeting with the IDEA Board relative to their funding request, strategy and projected business plan. In preparation for the meeting, the DLI team largely current or recently graduated software engineer majors at Northeastern University has asked for your help As a student in DMSB and someone who has successfully completed the managerial accouming course, they know that you can help them prepare for their meeting You think that this is a great opportunity for you to put your managerial accounting skills to work in an advisory role for these entrepreneur. Knowing the power of managerial accounting data, you anticipate the following questions to he asked. You should prepare cogent answers to these questions, drew relevant insights and provide any supporting exhibits and or visualizations that you believe will illumenate your analysis. You should use Excel for your analyses. In your advisory role, you need to prepare DLI to pinch their idea for funding REQUIRED QUESTIONS Describe the industry and the competitors in which DLI is entering. Discuss DLI's strategy to compete in this market 2. In what specific ways-financially-would the grant funding help DLI? How would this be expressed quantitatively? What further questions might you want to ask of this venture (and is there any r types of data that you thek would be useful?) 3. Classify the costs by behavior using number of transactions (customer orders) as the activity. Be sure to provide both quantitative and qualitative support when applicable Does there seem to be an opportunity to substitute fixed for variable costs (or vice vera)? 4. Prepare a contribution margin income statement by month with and without the funding Comment on DLI's cost structure 5. Calculate DLI's breakeven point. How does breakeven with and without the grant financing compare? Show your calculations in detail and provide any assumptions and/or approaches that you took to frame an answer to this potential question posed by the loand Assume grant funding for these questions 6. Which forecasts will the Thoard be most concerned about accuracy and/or not meeting the projections? Why? How should DLI respond to alleviate some of the Board's concem? 7. Prepare a sensitivity analysis (+/- 10%) around the average transactions per customer for the Q1 forecasts (present as a contribution margin income statement) What can you conclude from the tenutivity analysis? Table 1 DASHBOARD LOGISTICS INC (DLI) Sales Data January February March April May June July August September October November December Sales Forecast Sales Pipeline without Funding Qualified Customers (Companies) 112 246 400 800 1200 1600 2000 2400 Interested Customers 40 60 120 240 360 4801 600 Quoted Customers 5 10 16 32 48 64 80 Paying Customers 1 1 2 4 6 8 10 2800 3200 3600 4000 840 960 1080 1200 112 128 144 160 14 16 18 20 Sales Pipeline with Funding Qualified Customers (Companies) 112 246 1000 1400 1800 2200 2600 3000 3400 3800 4200 4600 Interested Customers 40 60 300 420 540 660 780 900 1020 1140 1260 1380 Quoted Customers 5 10 40 56 72 88 104 120 136 152 168 1841 Paying Customers 1 1 5 7 9 11 13 15 17 19 21 23 Monthly Revenue #Customers 1 1 5 7 9 11 13 15 17 19 21 23 Avg Transactions per Customer 1103 1500 2000 2500 3000 3300 3500 4000 4500 4700 4800 5000 Avg Selling Price per Transaction $0.10 $0.50 $0.75 $0.85 $1.00 $1.00 $1.00 $1.00 Total Monthly Revenue $45,500 $60,000 $1.00 $76,500 $1.00 $1.00 $1.00 $89,300 $100,800 $115,000 $110 $750 $7,500 $14,875 $27,000 $36,300 Transactions are orders placed by each customer with DLL. Table 2 DASHBOARD LOGISTICS INC (DLI) Pro Forma Profit and Loss Sales June January February March April May July $7,500 $14,875 $27,000 $36,300 $45,500 $110 $750 Operating Expenses August September October November December Total $60,000 $76,500 $89,300 $100,800 $115,000 $573,635 Executive, Sales, & Misc. Expenses Executive Payroll $2,000 $2,000 $2,000 $4,000 Engineers 50 50 50 50 $6,000 50 $8,000 $8,000 $0 $5,000 Marketing $0 $50 50 50 $0 $0 50 Sales Exp $110 $150 $1,000 $1.750 $2,700 $3,630 $4,550 Servers/Hosting $18 $20 $45 $68 $96 $124 $152 $10,000 $12,000 $12,000 $12,000 $5,000 $83,000 $10,000 $10,000 $10,000 $10,000 $10,000 $55,000 50 $6,000 $6,000 $6,000 $6,000 $24,000 $6,000 $7,650 $8,930 $10,080 $195 $245 $283 $317 $11.500 $58,050 5360 $1,922 Travel Expenses 50 50 $500 $500 $500 $500 $500 Total Executive Expenses 52.129 $2,170 $3,545 $6,318 $9,296 $12,254 $18,202 $500 $1,500 $1,500 $1,500 $26,695 $37,395 $38,713 $39,897 $34,360 $230,972 $1,500 $9,000 Accounting & Legal Expenses Accounting & Legal Payroll 50 50 Rent $2,200 Total Accounting & Legal Expenses $2,200 Total Operating Expenses $2,200 $2,200 $4,329 $4,370 50 $2,200 $2,200 $200 50 50 $200 50 50 $200 $4,000 $4,000 $4,000 $4,000 $4,000 $7,500 $7,500 $7,500 $9,000 $58,100 $4,200 $4,000 $4,000 $4,200 $4,000 $7,500 $7,700 $7,500 $9,000 $58,700 50 50 $600 $5,745 $10,518 $13,296 $16,254 $22,402 $30,695 $44,895 $46,413 $47,397 $43,360 $289,672 Profit Before Interest and Taxes ($4,218) ($3,620) $1,755 $4,358 $13,704 $20,046 $23,099 $29,305 $31,606 $42,887 $53,403 $71,640 $283,963