The reading portion is the missing piece that you need to complete this assignment.1. Calculate a pro-forma income statement for the first year of CCC (assume Steve Davidson does make and sell 30 canoes). Use a price that you think Steve should charge and briefly explain why you chose this price. Also, use 2 other prices (i.e., one that is lower and one that is higher) to examine how CCCs profit could change based on the price he charges. Please consider using Excel for this analysis.(Note that the case says that ‘Davidson projected almost $90,000 in sales in 1998 with gross profits of $52,000’. I’m not sure what this means, since it looks like he is starting the business in Aug., 1998. For your analysis, please ignore this information when doing your calculations). ### Davidson’s Total Expenses- **Power Equipment**: $5,530- **Hand Tools**: $835- **Cutters, Blades, and Bits**: $800- **Benches, Stands, and Cabinets**: $3,605- **Forms and Jigs**: $1,600- **Office Equipment**: $3,055**Marketing & Advertisement**:- **Canoe & Kayak Magazine**: $1,680 (12 months)- **Kanawa Magazine**: $340 (per year)- **Industry and Recreational Associations Press Release**: $300 (per year)**Rent Expenses**:- Rent: $4,212 ($351 x 12 months)**Other Operating Expenses** (telephone, internet, supplies, insurance, and maintenance): $8,644**Total Expense**: $27,156---### Exhibit 1: Wood Strip Canoe Manufacturers| Company | # of Models | Size Range | Customize | High Price (CAD) | Low Price | Custom Price | Mean Price 16-17' Boat ||---------------------------------|-------------|------------|-----------|-----------------|-----------|--------------|------------------------|| Northwoods (USA) | 8 | 10-17' | Limited to packages | $5,040 | $1,820 | $100-$600/ft. | $5,500 || Laughing Loon (Cdn) | 5 | 10-17' | Yes | $4,258 | $2,500 | $252/ft. | $4,250 || Franklin Cedar Canoes (USA) | 4 | 12'-18-1/2'| Yes | $2,500 | $1,700 | Quote by the job | $2,200 || Nashwa River Craft (USA) | 1 | 15' | Yes | $2,660 | $2,660 | Quote by the job | NA || Kevin Martin (USA) | 2 | 15-17' | Yes | $5,600 | $2,800 | $250-$1,500/ft. | $4,700 || Fletcher Canoes (Cdn) **Title: Business Planning and Market Analysis in Canoe Manufacturing**Davidson wanted assistance starting his company, so he enrolled in the 12-week business program at the Entrepreneurial Manufacturing Generator (EMG) in St. Thomas. The course was based on the case method and taught by faculty and graduates of the Ivey School of Business and Western University Engineering Sciences. After completing the 12-week course, students had the opportunity (once they had drafted an acceptable business plan) to progress to a start-up and mentoring phase conducted on site. CCC would rent space at the EMG for $351 per month. The shared EMG facility gave Davidson access to a wide range of business resources, including the EMG instructors and another woodworking shop. Davidson hoped that the close proximity of these resources would give CCC a competitive advantage.Davidson planned to produce 30 canoes in the first year and average one canoe every ten days, which would leave 65 days to buffer any unforeseen production delays (an experienced craftsman could build 25 to 30 canoes per year). Davidson would have to work seven days a week to maintain the production pace; however, he felt that he could handle a seven-day schedule for two to three years. Although the first canoes were scheduled to take almost 12 days to build, throughput time (the time from start to finish) would decrease as production techniques improved. Davidson knew that he would have to invest in some equipment which would include an estimated $5,530 for power equipment and accessories; hand tools at $835; cutters, blades, and bits at $800; benches, stands, and cabinets for $1,600; forms and jigs for $160; and office equipment for $3,055. Although production costs were expected to decrease as the manufacturing process developed, Davidson projected that variable costs would total $1,161 per canoe and selected annual operating expenses including telephone and internet charges, supplies, insurance, and maintenance would total $8,644. Davidson projected almost $90,000 in sales in the first year, with gross profits of $52,000.Promotion would consist of a Web page, advertisements in canoeing magazines and press releases to industry and recreational associations. The Internet would be the company’s primary means of promotion and sale, and Davidson planned on establishing a Web page complete with photographs, diagrams and interactive order forms. The Internet gave CCC access to thousands of prospective clients at virtually no cost. The company was also going to place

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6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...