Scenario: ABC Company sells widgets in three varieties (blue, red, and yellow) but has lost money for the past three years. Competitive intelligence shows the Company's products are priced 10% above the competition but that competitor prices will increase by at least 8% annually. Given the Company is mandated by Widget Cost Reform (WCR) to spend a minimum of x% of revenue on cost of goods sold (COGS), what actions would you recommend to the CFO? What are the key drivers to attaining profitability by 2015?
Please use the peach colored cells for your inputs and formulas in order to reach profitability and still satisfy the minimum WCR Expense Ratios mandated by the WCR regulations.
Facts
- WCR Expense Ratios (effective January 2012): Blue Widgets 85%, Red Widgets 80% and Yellow Widgets 90%
- Going forward, Administrative Expense Ratios improve by leveraging growth ... 1.0% for every 10% increase in widget sales for a given widget type