MEMORANDUM
To: Professor Teri Ziegler
From: Group P2
Subject: Year 4 and 5 Analysis for BLG
Date: October 21, 2011
The purpose of this memorandum is to compare the income summaries from the first 3 years of operation for comparison and analysis and to make predictions for year 5. Attached are supporting materials for further analysis. * BLG Year 4 Income Summary, page * Growth Comparison Chart, page * Target Profit Analysis, page * Sensitivity Analysis, page * Flexible Budget for Year 5, page * Returns on Hours and Investments, page
The Target Profit Analysis (pg. XX), provides the number of containers that BLG would have needed to sell to meet a target profit of $40,000. Actual sales of small, medium, and large containers in year 4 were 109, 122, and 35, respectively. Based on calculations from the Analysis (pg. XXX) Sales necessary to meet the goal were 140, 157, 44. Even though this goal was not met, BLG was capable of achieving the target profit of $40,000 in year 4. The Growth Comparison Chart (pg. XX) displays that from year 2 to year 3 BLG increased container sales by 156%. Growth was only 45% from years 3 to 4, while the target profit required 85% growth. Because the growth necessary was less than the historical growth rate, BLG could have feasibly reached a target profit of $40,000.
A Sensitivity Analysis (pg. XX) was prepared to examine how sensitive net income is to changes in cost of goods and price for services. If BLG purchases containers at costing 15% less than current, sales of 153, 172, and 49 units of small, medium, and large containers would have been required to meet the target profit of $40,000. Compared to the activity level associated with original income projection (pg. Target Analysis), the adoption of cheaper containers requires an increase in sales.
