ITEM FINDER“Never fear, Item Finder is here!”

2013SDSMT

Anne Christensen Brianna Dodge Benjamin Johnson Kyle Radtke Kristy Rennick

Work breakdown and team assignments:

Anne – Capital Outlay and ProForma Balance Sheet

Brianna – Researcher, Plan co-author

Ben – Product Concept, ProForma Cash, Break Even Analysis

Kyle – Editor, Plan co-author

Kristy – Income Statement and Capital Requirements

This list simply defines the major tasks for the report and who on the team has primary

responsibility for those tasks.

Business Idea

This business intends to manufacture and distribute the smartphone Item Finder™; it is a smart

phone accessory that uses an electromagnetic signal to detect a magnetic strip sticker on a lost

device. With the help of a downloadable app, the user simply plugs an attachment into his or her

phone that makes the phone beep when pointed in the direction of the item. As the phone is

pointed more directly at the lost element, or become closer in proximity, the frequency of the

beeping sound increases, firing more rapidly. The location of the business will be in Rapid City,

SD. Currently, there is not a unique item finder of the nature the business intends to build and

sell.

Capitalization Requirements

The initial capital requirement for this company is approximately $5,000. The company intends

to receive this capital from bank on loan. The loan to the bank should be repaid after 3 years in

payments of $300 per month; this translates to an interest rate of approximately 6% per month.

The capital outlay of our company is displayed on the next page in Table 1. It outlines our costs

for renting a 2,000 sq. ft. building, tools, materials, and other general supplies that are necessary

to start our business.

Table 1: Capital Outlay

Item Finder Capital OutlayFirst 3 months:

Building (rent at $11.50/sq ft) $6,000Mechatronic Tools $320Shipping Materials ($.25/unit) $75Inventory Case ($.50/unit) $150 Chords ($1/unit) $300 Magnetic Strips ($.015/unit) $4.5 Microchips ($6/unit) $1,800Office Furniture Desk $1,200 Computer $2,000 Chair $400 Printer $100 Phone $50Office Supplies Order Forms $50 General $50 Marketing (first 3 months) Sharp & Associates - initial brochure, web $2,490Utilities (3 months) $600Labor/Salaries (first 3 months) $6,400

ProForma Statements

The ProForma statements are displayed in landscape orientation over the next several pages. The

ProForma Cash statement in Table 2 details our projected units sold, costs of materials, labor,

overhead, utilities, and other general expenses. The bottom line displays the net change in cash

per month, ignoring taxes.

The ProForma Income statement in Table 3 displays the income generated on a month by month

basis. This sheet also details operationing expenses and income from total operations. The

ProForma Balance Sheet in Table 4 lists all of the current and total assets of our organization,

along with all liabilities and owner equity or retained earnings. Note that the value of total assets

is equal to the sum of the liabilities and owner equity, so the basic accounting equation holds

true.

These are conservative market projections, as our product will be advertised on Amazon.com

and various social media websites. A slow start is definitely expected, as indicated by the 100

units/month for the first 3 months, but we expect an increased demand from continued marketing

and word-of-mouth. For more marketing and supply chain information, please refer to the

organization’s marketing plan.

Table 2: ProForma Cash Statement

Item Finder Factory Month

1 2 3 4 5 6 7 8 9 10Sources of Revenue Projections 100 100 100 200 200 200 200 200 300 300 Sale Price $30 $30 $30 $30 $30 $30 $30 $30 $30 $30Total Revenue $3,000 $3,000 $3,000 $6,000 $6,000 $6,000 $6,000 $6,000 $9,000 $9,000

Cost of Goods Sold Case ($.50/unit) 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Chords ($1/unit) 1 1 1 1 1 1 1 1 1 1 Magnetic Strips ($.015/unit) 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 Microchips ($6/unit) 6 6 6 6 6 6 6 6 6 6Direct Material Cost $752 $752 $752 $1,503 $1,503 $1,503 $1,503 $1,503 $2,255 $2,255

Labor Bifur $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 Bofur $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 Bombur $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 Carlos Beatty, Jr. $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Hours Per Week 120 120 120 120 120 120 120 120 120 120Total Labor $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600

Overhead Labor Hours 120 120 120 120 120 120 120 120 120 120 Fixed Overhead $180 $180 $180 $180 $180 $180 $180 $180 $180 $180

Utilities

Black Hills Power $40 $40 $40 $40 $40 $40 $40 $40 $40 $40 MDU $30 $30 $30 $30 $30 $30 $30 $30 $30 $30 City $80 $80 $80 $80 $80 $80 $80 $80 $80 $80 MidContinent $50 $50 $50 $50 $50 $50 $50 $50 $50 $50Total Utilities $200 $200 $200 $200 $200 $200 $200 $200 $200 $200

Shipping Material $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 Delivery $0.15 $0.15 $0.15 $0.15 $0.15 $0.15 $0.15 $0.15 $0.15 $0.15Total Shipping Cost $25 $25 $25 $50 $50 $50 $50 $50 $75 $75

Loan 300 300 300 300 300 300 300 300 300 300Marketing 830 830 830 830 830 830 200 200 200 200Office 33 33 33 33 33 33 33 33 33 33Total General $1,163 $1,163 $1,163 $1,163 $1,163 $1,163 $533 $533 $533 $533

Net Change in Cash ($2,740) ($2,740) ($2,740) ($516) ($516) ($516) $114 $114 $2,338 $2,338

11 12 13 14 15 16 17 18 19 20 21 22 23 24

300 300 500 500 500 500 500 500 500 500 500 500 500 500$30 $30 $30 $30 $30 $30 $30 $30 $30 $30 $30 $30 $30 $30

$9,000 $9,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000

0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.51 1 1 1 1 1 1 1 1 1 1 1 1 1

0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.0156 6 6 6 6 6 6 6 6 6 6 6 6 6

$2,255 $2,255 $3,758 $3,758 $3,758 $3,758 $3,758 $3,758 $3,758 $3,758 $3,758 $3,758 $3,758 $3,758

$10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10$10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10$10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0120 120 120 120 120 120 120 120 120 120 120 120 120 120

$3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600

120 120 120 120 120 120 120 120 120 120 120 120 120 120$180 $180 $180 $180 $180 $180 $180 $180 $180 $180 $180 $180 $180 $180

$40 $40 $40 $40 $40 $40 $40 $40 $40 $40 $40 $40 $40 $40

$30 $30 $30 $30 $30 $30 $30 $30 $30 $30 $30 $30 $30 $30$80 $80 $80 $80 $80 $80 $80 $80 $80 $80 $80 $80 $80 $80$50 $50 $50 $50 $50 $50 $50 $50 $50 $50 $50 $50 $50 $50

$200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200

$0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10$0.15 $0.15 $0.15 $0.15 $0.15 $0.15 $0.15 $0.15 $0.15 $0.15 $0.15 $0.15 $0.15 $0.15

$75 $75 $125 $125 $125 $125 $125 $125 $125 $125 $125 $125 $125 $125

300 300 300 300 300 300 300 300 300 300 300 300 300 300200 200 200 200 200 200 200 200 200 200 200 200 200 200

33 33 33 33 33 33 33 33 33 33 33 33 33 33$533 $533 $533 $533 $533 $533 $533 $533 $533 $533 $533 $533 $533 $533

$2,338 $2,338 $6,785 $6,785 $6,785 $6,785 $6,785 $6,785 $6,785 $6,785 $6,785 $6,785 $6,785 $6,785

25 26 27 28 29 30 31 32 33 34 35 36 Total

500 500 500 500 500 500 500 500 500 500 500 500$30 $30 $30 $30 $30 $30 $30 $30 $30 $30 $30 $30

$15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $435,000

0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.51 1 1 1 1 1 1 1 1 1 1 1

0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.0156 6 6 6 6 6 6 6 6 6 6 6

$3,758 $3,758 $3,758 $3,758 $3,758 $3,758 $3,758 $3,758 $3,758 $3,758 $3,758 $3,758 $108,968

$10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10$10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10$10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0120 120 120 120 120 120 120 120 120 120 120 120

$3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $129,600

120 120 120 120 120 120 120 120 120 120 120 120$180 $180 $180 $180 $180 $180 $180 $180 $180 $180 $180 $180 $6,480

$40 $40 $40 $40 $40 $40 $40 $40 $40 $40 $40 $40$30 $30 $30 $30 $30 $30 $30 $30 $30 $30 $30 $30$80 $80 $80 $80 $80 $80 $80 $80 $80 $80 $80 $80$50 $50 $50 $50 $50 $50 $50 $50 $50 $50 $50 $50

$200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $7,200

$0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10$0.15 $0.15 $0.15 $0.15 $0.15 $0.15 $0.15 $0.15 $0.15 $0.15 $0.15 $0.15$125 $125 $125 $125 $125 $125 $125 $125 $125 $125 $125 $125 $3,625

300 300 300 300 300 300 300 300 300 300 300 300200 200 200 200 200 200 200 200 200 200 200 200

33 33 33 33 33 33 33 33 33 33 33 33$533 $533 $533 $533 $533 $533 $533 $533 $533 $533 $533 $533 $22,968

$6,785 $6,785 $6,785 $6,785 $6,785 $6,785 $6,785 $6,785 $6,785 $6,785 $6,785 $6,785 $162,640

Table 3: ProForma Income Statement

Item FinderProForma Income

Month1 2 3 4 5 6 7 8 9 10 11 12

Unit Sales 100 100 100 200 200 200 200 200 300 300 300 300Price $30 $30 $30 $30 $30 $30 $30 $30 $30 $30 $30 $30

Sales 3000 3000 3000 6000 6000 6000 6000 6000 9000 9000 9000 9000Cost of Goods Sold Material $752 $752 $752 $1,50

3$1,50

3$1,50

3$1,50

3$1,50

3$2,25

5$2,25

5$2,25

5$2,25

5 Labor $3,600 $3,600 $3,600 $3,60

0$3,60

0$3,60

0$3,60

0$3,60

0$3,60

0$3,60

0$3,60

0$3,60

0 Overhead $180 $180 $180 $180 $180 $180 $180 $180 $180 $180 $180 $180Gross Margin -

$1,532-

$1,532-

$1,532$717 $717 $717 $717 $717 $2,96

6$2,96

6$2,96

6$2,96

6Utilities $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200Loan $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300Marketing $830 $830 $830 $830 $830 $830 $200 $200 $200 $200 $200 $200Office Supplies $33 $33 $33 $33 $33 $33 $33 $33 $33 $33 $33 $33Total Operating $5,895 $5,895 $5,895 $6,64

6$6,64

6$6,64

6$6,01

6$6,01

6$6,76

8$6,76

8$6,76

8$6,76

8Income from Operations

($2,895)

($2,895)

($2,895)

($646)

($646)

($646)

($16) ($16) $2,233

$2,233

$2,233

$2,233

Taxes $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Net Income ($2,89

5)($2,89

5)($2,89

5)($646

)($646

)($646

)($16) ($16) $2,23

3$2,23

3$2,23

3$2,23

3

Year 2 Year 3 Total6000 6000 14500$360 $360 $1,080

180000

180000

435000

$45,090

$45,090

$108,968

$43,200

$43,200

$129,600

$2,160 $2,160 $6,480$89,55

0$89,55

0$189,95

3$2,400 $2,400 $7,200$3,600 $3,600 $10,800$2,400 $2,400 $10,980

$396 $396 $1,188$99,24

6$99,24

6$275,21

6$80,75

4$80,75

4$159,78

5$0 $0 $0

$80,754

$80,754

$159,785

Table 4: ProForma Balance Statement

Item FinderProForma Balance

Month1 2 3 4 5 6 7 8 9 10

Current Assets Cash $5,000 $1,890 $2,565 $2,565 $4,455 $5,130 $5,130 $5,130 $5,130 $6,750 Accounts Receivable $1,890 $2,565 $2,565 $4,455 $5,130 $5,130 $5,130 $5,130 $6,750 $7,290 Inventories $300 $300 $300 $600 $600 $600 $600 $600 $900 $900 Total Current Assets $7,190 $4,755 $5,430 $7,620 $10,185 $10,86

0$10,860 $10,860 $12,78

0$14,940

Other Assets Building $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 Equipment $320 $320 $320 $320 $320 $320 $320 $320 $320 $320Total Assets $9,510 $7,075 $7,750 $9,940 $12,505 $13,18

0$13,180 $13,180 $15,10

0$17,260

Current Liabilities Notes Payable $300 $300 $300 $300 $300 $300 $300 $300 $300 $300Total Current Liab $300 $300 $300 $300 $300 $300 $300 $300 $300 $300

Owner Equity $9,210 $6,775 $7,450 $9,640 $12,205 $12,880

$12,880 $12,880 $14,800

$16,960

Total Liab & Owner Equity

$9,510 $7,075 $7,750 $9,940 $12,505 $13,180

$13,180 $13,180 $15,100

$17,260

11 12 Year 2 Year 3 Total

$7,290 $7,290 $139,860

$145,800

$343,985

$7,290 $7,290 $144,720

$145,800

$351,135

$900 $900 $18,000 $18,000 $43,500$15,48

0$15,48

0$302,58

0$309,60

0$738,62

0

$2,000 $2,000 $24,000 $24,000 $72,000$320 $320 $3,840 $3,840 $11,520

$17,800

$17,800

$330,420

$337,440

$822,140

$300 $300 $3,600 $3,600 $10,800$300 $300 $3,600 $3,600 $10,800

$17,500

$17,500

$326,820

$333,840

$811,340

$17,800

$17,800

$330,420

$337,440

$822,140

Break Even Analysis

Table 5 shows the break even analysis for the organization. BEQ, or break even quantity, is the

average number of units that must be sold each month in order to justify our business. It is

calculated with the following formula:

BEQ= ¿Costs(Price per unit−Cost perUnit )

where the values for each variable are shown below. Additionally, the payback period is the time

needed to recover the cost of an investment. This was calculated by using the payback equation:

Payback period= ¿CostsAnnualCash Flow

Both of these values are very reasonable, as we expect to start selling 300 units per month after 6

months and 500 units starting in year two. Our initial investment will be recovered during the

middle of year 2, and our company will continue making profit after this period.

Table 5: Break Even Analysis

Item FinderBreak Even Analysis

Fixed cost per month $5,895Variable cost per unit Materials $7.515 Labor $2.4 Overhead $0.36Total $10.275Price per unit $30

BEQ 299 units/month

Payback 1.39 years