Business Proposal
Company Guide
Everest Technology Computer can be described as new firm that intends to manufacture computer and its accessories. Considering that the company will operate in competitive market environment, Everest Technology must understand the costs structure to boost revenue and maximize income.
The objective of this paper is always to provide a business plan that will assist the Everest Technology to increase revenue and increase profits. The next section examines the approach that Everest Technology can employ to increase revenue.
Strategies to Increase Income
Everest Technology will use a number of techniques to increase revenue: The strategies will be as follows:
Expense cutting assess
Increase the unit price
Embrace sales
One of the best strategies that Everest Technology could employ to increase earnings is to decline costs since cost lowering is easier to implement than price go up. The formula below reveals the four factors that affect earnings:
Equation Earnings = “Revenue – (Variable costs & Fixed (capacity) costs). inches
Typically, costs predictable are easier to control. Hence, an appropriate approach to increase revenue is to implement the cost reducing measure, that can assist the organization to increase profits.. Thus, the organization could reduce costs in the areas such as advertising and circulation, purchasing, operations, production, research and development. Cost reduction in these areas will create a corresponding increase in revenue.
Moreover, the company may save the fixed costs by slicing the costs of anything that does not generate income. For example , the corporation could decrease the costs in rent, travel, interests in payable and communication. Employing cost decrease analysis, the company will generate 5% embrace profit margin because 5% reduction in the fixed costs will bring about the 5% increase in income margin everything else being the same. This is revealed in Stand 1 .
Desk 1: Embrace Revenue through Fixed Cost Reduction
Initial
Option you
Sales
Expense
70
66
Fixed
31
25
Product Variable Price
0. four
0. some
Variable
40
40
Income taxes and Insurance
10
12
Profits
twenty
25
Profit Margin
twenty percent
25%
Another method the business could use to increase earnings is by minimizing the changing costs product through outsourced workers, cheaper freelancing, and away shoring and improve performance. Typically, five per cent decline in variable costs would bring about 2% improved in the earnings margin everything being similar. This is exposed in Stand 2 .
Desk 2: Embrace Revenue through Variable Cost Reduction
Preliminary
Option 2
Sales
Cost
70
sixty-eight
Fixed
31
30
Device Variable Cost
0. four
0. 35
Variable
forty five
38
Taxation and Insurance
10
twelve
Profits
20
22
Earnings Margin
twenty percent
22%
Another strategy to increase revenue is to increase the unit price while maintaining the volume of production. With this strategy, five per cent increase in sales will result in the 3% increase in the net income margin as being revealed in Table 3. However , this plan is not really advisable since customers might switch to rivals with the increase in price. ( Landsburg, 2002).
Table three or more: Increase Earnings by increasing Price Strategy
Initial
Alternative 3
Revenue
Quantity
15
10
Value
10
10. 5
Expense
70
68
Fixed
31
30
Unit Variable Cost
0. 5
0. 5
Variable
forty five
40
Fees and Insurance
10
12. 5
Earnings
20
24. 5
Revenue Margin
20%
23%
On the other hand, the company can increase earnings by increasing the sales while the set costs stay constant as being revealed in Table four. The company will certainly realize 1% increase in revenue margin by simply increasing sales.
Table 5: Increase Earnings By increasing Sales
Preliminary
Option some
Sales
Variety
10
12. 5
Price
10
15
Cost
seventy
72
Fixed
30
30
Unit Varying Cost
0. 4
0. 4
Adjustable
40
40
Taxes and Insurance
15
10. 5
Profits
20
22. five
Profit Margin
20%
21%
1 . a couple of: Determination of Profit-maximizing Volume
The basic assumption of a organization is to take full advantage of profits. Therefore, Everest Technology will recognize profit once revenue is definitely greater than costs as being exposed below:
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