The assignment discusses Schnauzer Security Systems. Additionally, there is a description of forecasting and decision analysis. So, it is important to recoup your initial investment before then.
Schnauzer Security Systems- forecasting and decision analysis
Homework 4: Schnauzer Security Systems “If there is an intruder, we’ll howl!” Introduction: Firstly, this problem will provide you with practice in NPV, margin and markup, breakeven analysis. Secondly, forecasting, and decision analysis, which are all important tools for managers to know. The problem also combines material from two or more learning modules. Scenario: You are part of the management team for Schnauzer Security Systems, which manufactures building security systems. One of your products is a control panel that is used in a wide variety of applications. You have manufactured the product for the past 15 years, and you have enjoyed strong sales growth.
Schnauzer Security Systems- forecasting and decision analysis
Unfortunately, your design engineers have indicated that the current panel is rapidly becoming obsolete, and it will not be capable of interfacing with new sensor technology, which is rapidly taking over the market. So, you must discontinue the current product soon. The question is whether or not you can afford to change over to a new product given the high cost of redesign and retooling. Alternatively, you could outsource the technology to a Chinese manufacturer. But if you do so, you will not achieve significant profit from reselling the Chinese panel. If you choose to manufacture and sell the new panel, your engineers predict that the product life cycle will be about 10 years.
Schnauzer Security Systems- forecasting and decision analysis
So, it is important to recoup your initial investment before then. Questions: To answer the following questions, use the data in the accompanying Excel file. 1. Using the markup percentage, what is the sales price? 2. What is the margin given the price you calculated above? 3. Based on your calculations in Question 1, how much must you sell to break even in the first year? Hint: Let your fixed cost be the sum of initial investment and one year of annual fixed cost.
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