BI_Master_May_12_3pm
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Becoming Independent provides job training and placement for special needs adults. Their paper shredding business is their most viable revenue generating activity. This document summarizes a master budget and strategic plan to grow the paper shredding segment. It recommends allocating $5,000 annually for marketing led by a new Business Development Director to obtain a 20% increase in volume. Surveying customers and tracking metrics like leads generated will help monitor progress. Doubling volume in 5 years could be achieved while staying within labor constraints. The plan aims to increase revenue while maintaining BI's mission of employing special needs adults.
BI_Master_May_12_3pm
- 1. Becoming Independent Master Budget Report By Marieshka Barton Cora Fontana Carrie Gault Michael Miscio Alison Mokski Jingmei Su Managerial Accounting Seminar MBA 535 Professor Bean Department of Business and Economics Sonoma State University May 12, 2015
- 2. 1 Executive Summary We suggest Becoming Independent (BI) maintain its premium paper-shredding price and continue targeting clients aligned with its mission. The segment of businesses willing to pay a premium is small, but it does exist and being a cost leader is not a strategy that BI could support. To be competitive, BI would need to charge below the market rate of $0.19 per pound, resulting in net operating losses. Annual sales of $55,800.00 and a client base of 50 accounts have remained steady over several years with no sales or marketing efforts. BI is currently only utilizing an estimated 30% of their shredding capacity and has the room to grow. All recommendations are based on BI operating within the niche premium market. Our strategic plan is to allocate $5,000 towards an annual traceable marketing budget. The in-house marketing staff, whose salary is a common cost, will drive targeted marketing efforts to bring in better-qualified leads. In addition, the new Business Development Director’s (BDD) time will exclusively focus on obtaining new accounts. The BDD will have a monthly volume goal of 3,000 lbs and will track lead generation and closing ratios. We also suggest BI establish customer management processes through customer data collection and customer follow-up. Surveying customers will gage customer satisfaction and establish a clear baseline. Labor is fairly inexpensive and available, but BI does experience high turnover rates for supervisors and training can be time consuming. Proactively cross-training and starting a management certification program will address these issues. If BI doubles its sales volume at a growth rate of 40%, low cost capital improvements can be supported. If volume drops by 20%, BI can temporarily maintain break-even. But, if a volume drop coincides with the shredder breaking down, it is advised to exit the segment and shift to the opportunity cost segment of document collation. Background BI provides job skill training and job placement services to 1,300 special needs adults. It employs 300 people and operates on a $14.5 million dollar annual revenue. BI depends on government grants for 99% of the revenues that make up this budget, making BI financially vulnerable to government budget cuts. In order to augment government grants, BI has developed several micro-businesses employing their special needs adult clients. BI’s paper-shredding business represents the organization’s most viable micro-business segment. BI has asked us to analyze the financial potential of this segment. Our analysis of the paper-shredding business is framed within the understanding that BI is a mission-driven nonprofit and there is a customer segment willing
- 3. 2 to pay premium rates for shredding as a means of supporting BI. BI’s shredding client relationships result from customers’ 1) charitable values 2) personal experience with disabled adults and / or 3) family members receiving BI services. Previously, we suggested BI maintain its premium price while incrementally increasing advertising in order to gain market recognition and market share. This analysis continues to assume the mission- driven framework, and forecasts a master budget as well as a flexible budgeted income statement under various profit scenarios. Status Quo The cost volume profit analysis showed that BI earns a per pound price premium of approximately 37% ($0.31 per pound versus the market rate of $0.19 per pound) for the shredding process. Total revenue per pound averages $0.31 cents because shredded paper is sold to recyclers for $0.05 per lbs BI could temporarily withstand lowering its price to $0.26 per lbs and operate at break-even. However, BI has been charging a premium price while serving the same 50 customers with approximate annual revenues of $55,000 for the past several years. The 50 customers are small business owners producing an average of 300 to 500 lbs of paper per month. These small business customers were acquired through word-of-mouth marketing from friends and family of BI participants, with no sales efforts or marketing efforts. BI currently processes 180,000 pounds per year with a capacity to process 576,000 pounds per year. Special needs employees can only work 20 hours per week. Two special needs laborers can processes 375 pounds of paper per hour or 15,000 pounds per month. If processing paper reaches seasonal volumes of 25,000 per month, BI would need additional trained labor. Master Budget/Most Likely Scenario The Master Budget is also our most likely scenario and is based on a conservative sales forecast. This scenario includes the addition of new accounts generating approximately 3,000 lbs per month. This increase is due to the recently hired Business Development Director (BDD) and a new $5,000 annual traceable marketing budget resulting in a projected 20% annual increase in sales. This growth rate is reasonable because BI 1) has a strong brand recognition 2) operates in a niche market of business owners valuing goodwill donations as well as services performed 3) the BDD has an existing pipeline of large municipal leads to leverage and lastly 4) as a governmental grant recipient, receives preferential treatment in contract awards. An annual 20% growth will result in $66,960 estimated annual revenue but a $1,530 decrease in net operating income (see figure 1).
- 4. 3 Budgeted Most Likely Scenario 20% Volume Increase Status Quo Pounds shredded 216,000 180,000 Revenue Per Pound 0.31 0.31 Total Revenue $66,960.00 $55,800.00 VC $46,140.00 $38,450.00 CM $20,820.00 $17,350.00 Fixed $10,000.00 $5,000.00 NOI $10,820.00 $12,350.00 Figure 1. Most likely scenario versus status quo contribution margin Assumptions: Risks: Customers might go to the low cost competitor. The paper-shredding market is competitive with an average rate of $0.19 per lbs. And, compared to competitors, BI’s paper-shredding services lack sophistication. BI does not shred onsite or offer secured totes. And, some clients might not be comfortable around disabled adults, despite sympathy for BI’s mission. Another challenge is the time needed to train disabled adult employees, which could disrupt the flow of reliable services. Labor Maintain the present supervisory work force at $12.50 per hour. Maintain same level of trained disabled adult workforce at $7.75 per hour Participants can only work 5 days per week at 4 hours per day Participants continue to be highly functional and that no new laws pass for increase in wage Machinery/ Capital Shredding machine does not break down and only needs regular maintenance BI continues using the same workspace Mechanical shredding is not replaced by new technology Vehicle Fleet Gas prices hold below $5.00 per gallon for the next five years Transportation vehicles do not need replacing within the next five years Operating Structure Simple cost model using easily identifiable direct and indirect costs Cash collections of 50% in the month of the shredding service and 50% in the month after the collections based on experience with services Cash disbursements: wages and liabilities are paid immediately Market Maintain premium market price range $0.26 to $0.31 per lb Price Common cost: maintain part time marketing personnel $5,000 traceable annual budget Sales Force BDD’s time is freed to be more involved in acquiring new business contracts. BDD is able to secure at least 20% increase in volume
- 5. 4 Conclusions: By acquiring premium paying accounts at approximately 36,000 lbs per year, BI could realize a 20% growth rate reaching capacity within 5 years. Due to the additional fixed advertising budget, there will be a decrease of $1,530 net operating income in year one (see figure 1). However, BI can absorb this decrease in the short-term as an investment to seed future growth. The additional volume will not reach BI’s labor constraint. Nonetheless, it is prudent for BI to forecast year two’s additional labor demands during the tax season. Recommendations for Most Likely, Best Case, and Worst Case Scenarios: 1. Marketing Spend Recommendation The following list represents possible low cost marketing options: Run a December through February ad in the Press Democrat and or The Bohemian Print flyers and have BI clients distribute to downtown businesses Public service announcements (free radio ads) Social media: Facebook Page 2. Networking In addition to BI’s BDD door-to-door sales efforts, we recommend the following networking channels: Use the North Coast Business Journal 2015 Book List to target local companies aligned with BI’s mission and services Target other non-profit business with community related missions Target family members of special needs adults and their companies 3. Customer Survey BDD will survey customer’s experiences and report results to the CFO for Balance Scorecard evaluation. Customers should be surveyed: “How likely is it that you would recommend us to a friend or colleague?” “How did you hear about us?” “Did anyone refer you to us?” 4. Plan, Monitor, and Control (see Appendix E for Flexible Income Statement) Plan activity forecast for direct labor that can potential be a constraint Monitor success of advertising and business development through collection of customer engagement information Track planning budget versus actual data and analyze activity, revenue, and spending variances to plan and control paper shredding business activities 5. Dashboard / Balanced Score Card (see Appendix F for Dashboard) In order to drive behavior and hold people accountable to strategic goals, the following metrics should be tracked: Measure customer surveys Leads generated and number of touch points per lead
- 6. 5 Closing ratio Monthly volume goal (3,000 monthly / 36 ,000 annually) Best Case Scenario Securing Sonoma State University (SSU), Santa Rosa Junior College (SRJC), and Piner High School contracts in addition to the most-likely scenario represents BI’s best-case scenario. SSU, SRJC and Piner together produce 3,000 lbs per month. The additional 72,000 lbs of annual volume will increase BI’s volume from 180,000 lbs 252,000 lbs resulting in a 40% revenue increase (see figure 2). Figure 2. Best-case scenario contribution margin Assumptions: Assumptions are consistent with the Master Budget with the addition of: The paper-shredding machine does not need replacing with the additional 40% increase. BI’s BDD can acquire the SSU, SRJC, and Piner High School contracts or similar contracts. Risks: BI’s paper-shredding business is still new, and market relationships are still forming. Contracts will likely not be linear in acquisition. And, BI has only one sales person with limited time to develop the paper-shredding business due to the shared responsibility of promoting BI’s other micro-business and general public relations. BI also risks its BDD not producing results, becoming ill, being poached by other companies, etc. At these volumes, there will be labor constraints due to special needs laborers four-hour workday limits. Another risk is retaining qualified supervisors at $12.50 per hour whose low pay results in a high turnover. Conclusions: Securing the three large municipal contracts in addition to the most likely will increase volume by 40% and net income by $1,940. School contracts are ideal for BI due to their consistently high volume of shredding needs compared to small businesses. Also, these contracts have low security needs compared to other government contracts, so BI will be able to serve them with their existing equipment and facility adding a projected 72,000 lbs without increasing fixed costs. The additional volume does not exceed BI’s space capacity (324,000 tons of Budgeted Best Case Scenario 40% Volume Increase Pounds shredded 252,000 Revenue Per Pound 0.31 Total Revenue $78,120.00 VC $53,830.00 CM $24,290.00 Fixed $10,000.00 NOI $14,290.00
- 7. 6 capacity remains). Labor capacity will need to be addressed. Currently, BI is staffed to process 15,000 pounds per month; the additional contracts will yield an average of 21,000 pounds per month. And, sales forecasts show paper-shredding spikes such as the tax season between February and April. Beyond labor variable costs, BI should not invest in fixed costs until the BDD has a proven record of acquiring large volume long-term contracts. Recommendations: 1. Administration Assistant Contract with Piner High School to place honor students needing community service hours for graduation in part-time administration assistant roles. The assistant can support BDD in paperwork and customer surveys while earning valuable work experience and graduation credits. 2. Increase labor Flexibility Cross train additional special-needs clients at $7.75 per hour to process volume increases especially during tax season. Each special-needs laborer takes one week to train. After training, a special-needs laborer can process 7,500 lbs per month. Laborers can rotate tasks for greater job satisfaction and performance. 3. Management Certificates for Supervisors Partner with SRJC to offer internships and independent work-study credits towards a Management Certificate. Systematically developing and recognizing transferable management skills would make a paid internship with BI more attractive while increasing supervisor professionalism and retention. 4. Capital Improvements (if BI doubles the volume) Capital improvements will only be made if contracts are secured. We recommend investing in equipment that is visible to the customer such as clean standardized totes with contact information. We recommend the following low cost purchases: Invest in rolling totes that could be rolled in and out of the warehouse to efficiently utilize existing space, delaying the need to build out or move. Invest in smaller 32-gallon totes at $55 each. Smaller totes are easier to lift improving process efficiency and limiting workman compensation liabilities (see figure 3). Invest in lockable totes (an additional $5 per lock) to more easily secure large municipal contracts with higher security standards.
- 8. 7 Figure 3. Best-case scenario with capital improvements Worst Case Scenario The functional worst-case scenario results from a 20% volume decrease. In this scenario, the premium price is maintained but sales drop resulting in a low annual net operating income of $3,880 (see figure 4). In the non- functional worst-case scenario, the 20% volume decrease is coupled with the paper shredder malfunctioning requiring a new machine lease agreement. This scenario results in a negative net operation income of $9,120 (see figure 5). Figure 4. Worst-case scenario contribution margin Figure 5. Worst-case scenario with lease cost Assumptions: The increased Marketing Budget and BDD’s additional time has no effect on sales BI holds its premium price at $0.31 Customers go to the low-cost provider BI is not able to maintain its volume The shredder machine breaks down Budgeted Best Case Scenario Capital Improvement (10 totes) Pounds shredded 252,000 Revenue Per Pound 0.31 Total Revenue $78,120.00 VC $53,830.00 CM $24,290.00 Fixed $10,600.00 NOI $13,690.00 Budgeted Worst Case Scenario 20% Volume Decrease Pounds shredded 144,000 Revenue Per Pound 0.31 Total Revenue $44,640.00 VC $30,760.00 CM $13,880.00 Fixed $10,000.00 NOI $3,880.00 Budgeted Worst Case Scenario 20% Volume Decrease and Shredder Failure Pounds shredded 144,000 Revenue Per Pound 0.31 Total Revenue $44,640.00 VC $30,760.00 CM $13,880.00 Fixed $23,000.00 NOI ($9,120.00)
- 9. 8 Risks: If volume and price per pound continue to decrease over several years, it may be too late to change course. If the machine needs to be replaced in the next year (instead of in 5 to 10 years) before revenues increase, BI would not be able to recover. This exposes BI to too much risk over the long term. Conclusions: BI could temporarily withstand a drop in volume and maintain break-even (see figure 4). However, if BI had to replace the shredding machine under worst-case conditions, net operating income would be negative. The price to replace (not to repair) the shredding machine unit (hopper, conveyor, and shredder) is approximately $50,000 to $55,000 necessitating a lease agreement. The lease payment per year, including an interest rate of 7% over 5 years, would be approximately $13,000 for five years. A decrease in volume coupled with a lease agreement would result in a negative $9,120 annual net operating income making the paper-shredding segment grossly unprofitable (see figure 5). Recommendations: Under the worst-case scenario, we recommend BI re-examine its budget and change course. Do not wait until year’s end to change direction if volume drops 20%. Consider charging the break-even price of $0.26 If the shredder needs to be replaced in addition to a 20% decrease in volume, we recommend that BI 1) salvage the paper-shredding unit and 2) cease the paper-shredding business and shift to its opportunity cost segment of contracts services: assembly and document collating.
- 10. 9 Appendix A SALES and CASH COLLECTIONS BUDGET Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Year Total 0.8% 3.3% 1.3% 1.3% 1.9% 1.2% 3.6% 5.8% 6.6% 17.9% -4.3% -11.8% Unit 15,300 15,800 16,000 16,200 16,500 16,700 17,300 18,300 19,500 23,000 22,000 19,400 216,000.00 Shredding 0.310 4,743.00 4,898.00 4,960.00 5,022.00 5,115.00 5,177.00 5,363.00 5,673.00 6,045.00 7,130.00 6,820.00 6,014.00 66,960.00 Total Sales 4,743.00 4,898.00 4,960.00 5,022.00 5,115.00 5,177.00 5,363.00 5,673.00 6,045.00 7,130.00 6,820.00 6,014.00 66,960.00 Percentage of sales collected in the period of the sale0.50 Percentage of sales collected in the period after the sale0.50 Beginning Receivable2,500.00 2,500.00 Jul-15 2,371.50 2,371.50 4,743.00 Aug-15 2,449.00 2,449.00 4,898.00 Sep-15 2,480.00 2,480.00 4,960.00 Oct-15 2,511.00 2,511.00 5,022.00 Nov-15 2,557.50 2,557.50 5,115.00 Dec-15 2,588.50 2,588.50 5,177.00 Jan-16 2,681.50 2,681.50 5,363.00 Feb-16 2,836.50 2,836.50 5,673.00 Mar-16 3,022.50 3,022.50 6,045.00 Apr-16 3,565.00 3,565.00 7,130.00 May-16 3,410.00 3,410.00 6,820.00 Jun-16 3,007.00 3,007.00 Total Cash Collections4,871.50 4,820.50 4,929.00 4,991.00 5,068.50 5,146.00 5,270.00 5,518.00 5,859.00 6,587.50 6,975.00 6,417.00 66,453.00 Schedule of Cash Collections July 1, 2015 through June 30, 2016 Sales Schedule
- 11. 10 Appendix B CASH DISBURSEMENTS BUDGET Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Year Total Account Payable, beginning Direct Materials 229.50 237.00 240.00 243.00 247.50 250.50 259.50 274.50 292.50 345.00 330.00 291.00 3,240.00 Direct Labor 3,040.11 3,139.46 3,179.20 3,218.94 3,278.55 3,318.29 3,437.51 3,636.21 3,874.65 4,570.10 4,371.40 3,854.78 42,919.20 MOH - - 1,250.00 - - 1,250.00 - - 1,250.00 - - 1,250.00 5,000.00 SG&A - - 1,250.00 - - 1,250.00 - - 1,250.00 - - 1,250.00 5,000.00 Capital Purchases - - - - - Total Estimated Disbursements 3,269.61 3,376.46 5,919.20 3,461.94 3,526.05 6,068.79 3,697.01 3,910.71 6,667.15 4,915.10 4,701.40 6,645.78 56,159.20 July 1, 2015 through June 30, 2016 Cash Disbursement Schedule
- 12. 11 Appendix C CASH TOTAL BUDGET Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Year Total Cash balance, beginning 2,000.00 3,601.89 5,045.93 4,055.73 5,584.79 7,127.24 6,204.45 7,777.44 9,384.73 8,576.58 10,248.98 12,522.58 Estimated Cash Collections 4,871.50 4,820.50 4,929.00 4,991.00 5,068.50 5,146.00 5,270.00 5,518.00 5,859.00 6,587.50 6,975.00 6,417.00 66,453.00 Total Cash available 6,871.50 8,422.39 9,974.93 9,046.73 10,653.29 12,273.24 11,474.45 13,295.44 15,243.73 15,164.08 17,223.98 18,939.58 148,583.34 Estimated Disbursements Direct Materials 229.50 237.00 240.00 243.00 247.50 250.50 259.50 274.50 292.50 345.00 330.00 291.00 3,240.00 Direct Labor 3,040.11 3,139.46 3,179.20 3,218.94 3,278.55 3,318.29 3,437.51 3,636.21 3,874.65 4,570.10 4,371.40 3,854.78 42,919.20 MOH - - 1,250.00 - - 1,250.00 - - 1,250.00 - - 1,250.00 5,000.00 SG&A - - 1,250.00 - - 1,250.00 - - 1,250.00 - - 1,250.00 5,000.00 Capital Purchases - - - - - Total Estimated Disbursements 3,269.61 3,376.46 5,919.20 3,461.94 3,526.05 6,068.79 3,697.01 3,910.71 6,667.15 4,915.10 4,701.40 6,645.78 56,159.20 Cash balance, ending 3,601.89 5,045.93 4,055.73 5,584.79 7,127.24 6,204.45 7,777.44 9,384.73 8,576.58 10,248.98 12,522.58 12,293.80 July 1, 2015 through June 30, 2016 Cash Schedule
- 13. 12 Appendix D NET INCOME STATEMENT Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Year End Schedule Shredding Revenue 1 4,743.00 4,898.00 4,960.00 5,022.00 5,115.00 5,177.00 5,363.00 5,673.00 6,045.00 7,130.00 6,820.00 6,014.00 66,960.00 Cost of Service 2,3 3,269.61 3,376.46 3,419.20 3,461.94 3,526.05 3,568.79 3,697.01 3,910.71 4,167.15 4,915.10 4,701.40 4,145.78 46,159.20 Gross Margin 1,473.39 1,521.54 1,540.80 1,560.06 1,588.95 1,608.21 1,665.99 1,762.29 1,877.85 2,214.90 2,118.60 1,868.22 20,800.80 Operating Expenses 4,5 - - 2,500.00 - - 2,500.00 - - 2,500.00 - - 2,500.00 10,000.00 Net Operating Income 1,473.39 1,521.54 (959.20) 1,560.06 1,588.95 (891.79) 1,665.99 1,762.29 (622.15) 2,214.90 2,118.60 (631.78) 10,800.80 Budgeted Monthly Income Statement July 1, 2015 to June 30, 2016
- 14. 13 Appendix E Flexible Income Statement Use the monthly revenue and spending variance to track price per pound. Do not analyze fixed costs because they are not distributed evenly throughout the year. Appendix F Monthly Performance Budget fixed variable Planned Budget Activity Variance Flexible Budget Percentage Difference Revenue and Spending Variance Actual Budget Unit Revenue 0.31 0.31 0% 0.32 lbs processed 15,300 18,000 18% 18,000 Total Revenue 4,743 837 u 5,580 18% 180 f 5,760 Variable Expenses FTE Mgt (i.e. Paula) 0.067 1,020 180 u 1,200 18% - 1,200 FTE Driver(s) 0.042 638 113 u 750 18% - 750 Gas - total miles @ 10 mpg x $3/gal 0.010 153 27 u 180 18% - 180 FTE Instr / Sup 0.049 744 131 u 875 18% - 875 FTE Participants 0.042 638 113 u 750 18% - 750 Direct Supplies 0.005 77 14 u 90 18% - 90 Fixed Expenses Advertising 417 417 - 417 0% - 417 Box Truck, Maintenance/Insurance 250 250 - 250 0% - 250 Shredder, Maintenance 125 125 - 125 0% - 125 Forklift, Maintenance 42 42 - 42 0% - 42 Total Expenses 4,102 577 4,678 14% - 4,678 Net Operating Income 641 260 f 902 41% 180 f 1,082 Flexible Budget and Performance Analysis by Month
- 15. 14 KPI to be tracked monthly Appendix G ORIGINAL CVP ANALYSIS 0% 5% 10% 15% 20% 25% 30% 0 5 10 15 20 25 30 35 40 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16Mar-16 Apr-16 May- 16 Jun-16 AquaLine:ClosingRatio CustomerEngagements Closing Ratio and Volume of Closed Sales and Leads Generated: Advertising, BDD, Referral Closed Sales Leads Generated -A Leads Generated -BDD Leads Generated -R Closing Ratio 15,000 20,000 25,000 30,000 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 PoundsShredded Budgeted vs Actual Volume Budget Sales Actual Activity -50.0% 0.0% 50.0% Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 PercentageChange Monthly Sales Volume Rate of Change: Blue Budgeted vs Red Actuals Rate of Change Budgeted Sales Rate of Change Actual Sale
- 16. 15 Fixed Yearly Common Traceable Pounds shredded 180,000.00 Advertising Revenue Per Pound 0.31 Box Truck, Maintenance/Insurance 3,000 Total Revenue 55,800.00 Lease/Rent 2nd Box Truck VC 38,450.00 Shredder, Maintenance 1,500 Lease/Rent/Buy Business Development CM 17,350.00 Forklift, Maintenance 500 Fixed 5,000.00 Facilities ($1 per sq ft rent) 1,000 Fixed Costs 5,000 NOI 12,350.00 Costs Contribution Margin Income Statement Capacity (lbs) 576,000 Space sq ft 1,000 Pounds 51,873.20 Shredding per lb 0.26 Number of Customers 50 Dollars 16,081 Recycling per lb 0.05 Average Revenue per customer $1,116 Total unit revenue 0.31 Pounds 128,127 Dollars $39,719 Variable unit cost per lb 0.21 Unused Capacity Percentage 71% Current estimate lbs per year Change Unit CM 0.10 180,000 1.00 CM/NOI 1.40 CM Ratio 31.1% Operating Leverage Assumptions Unit Price/Cost Per Pound Breakeven Margin of Safety CVP Analysis Unit CM Income