Assignment: Engineering Economy Case Study: Mountaineer Manufacturing
You are starting a manufacturing company in Pittsburgh, Pa.
Given the following information, what are the projected income statements for this company for the next 5 years?
Management/Administration cost:
CEO (Your Salary) $150,000
VP Marketing $100,000
VP Sales $125,000
Chief Technology Officer $100,000
VP Operations $100,000
Other Administration Personnel Salary Combined: 400,000
Benefits for above personnel: Add 40% of total salary
Inflation: Above salaries are for year 1. These go up by inflation of 2%/year.
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Year
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Total Salary
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Total Salary + Benefits
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Year 1
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Year 2
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Year 3
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Year 4
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Year 5
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Facilities: Lease Plum Industrial Court Building, 20,000 sq.ft. @ $16/sq.ft. per year
Included rent and utilities. Lease remains the same over the next 5 years.
Depreciation of Machinery: Purchase 5 different automated machines for flexible work cell. The total cost of the machines is spread out over 5 years per IRS rules. Use numbers in chart below for total year by year depreciation in income statement.
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Year
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Depreciation
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Year 1
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80000
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Year 2
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150000
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Year 3
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140000
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Year 4
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140000
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Year 5
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80000
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Sales Forecast:
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Year
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Units Forecast
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Revenue Forecast @ $630 per unit
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Year 1
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10000
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Year 2
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20000
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Year 3
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25000
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Year 4
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30000
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Year 5
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35000
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Direct Product Costs:
Per unit labor $210 Assume per unit cost remains the same over the next 5 years.
Per unit material $310 Assume per unit remains the same over the next 5 years.
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Year
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Units Forecast
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Direct Labor Cost
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Direct Material Cost
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Year 1
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10000
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Year 2
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20000
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Year 3
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25000
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Year 4
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30000
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Year 5
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35000
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Tax rate:
Take off 40% of Before Tax Income as taxes (Put in Less Taxes row) Tax rate represents a combination of federal and state taxes. Assume tax = 0, if there is no income or a loss.
Fill out income statement table below for the next 5 years below:
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Year
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Year 1
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Year 2
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Year 3
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Year 4
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Year 5
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Revenue
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Management/Administration Cost
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Facilities Cost
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Product Costs:
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Direct Labor Cost
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Direct Material Cost
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Depreciation Cost
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Total Costs
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Before Tax Income
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Less Taxes
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After Tax income
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