Concept Tent (also known as the solar powered tent) was thought up because of demand by nomads, recreational campers, and disaster victims. Tents are typically used as overhead shelter for festivals, weddings, backyard parties, and major corporate events and the fact that all tent users need to keep in touch with their families, friends and colleagues while they’re for example, camping and roaming around the festival site. Kaleidoscope and Orange Company designed it in partnership to celebrate Glastonbury Festival. Its design is the revolutionary new way it collects direct sunlight. The idea is that specially coated solar threads are woven into conventional fabric so designers wouldn’t have to use fixed solar panels to harness the energy. It would also have three directional glides that can be moved throughout the day to maximise solar efficiency and energy collection. But the most amazing bit about this concept solar powered tent is its central wireless control hub which lets you see the amount of energy being generated and used, as well as sending out a wireless internet signal for anyone who needs to surf the internet. The control hub also has a wireless charging pouch which powers mobile phones and other portable devices without the need for messy wires and multiple chargers. The ‘magnetic induction’ technology passes an electric current through a coil embedded in the charging pouch and this in turn generates a magnetic field which creates a charge and powers the battery. Also controlled by the central hub is the most amazing bonus for the ultimate posh camping experience… an internal heating system. This takes the form of a heating element that’s embedded within the tent’s groundsheet giving under floor heating that can be triggered automatically once the temperature falls below a set level. The market demand for the Concept Tent is estimated to be 2,000 units in its first year of production and expect to increase sales by as much as 10% per annum thereafter. The variable costs per unit are estimated as follows: raw materials, £8.00; packaging, £2.00; direct labour, £5.00; distribution, £3.00. The inflation rates for the next three years are forecast to be 3%, 5% and 6%. Inflation will affect variable costs for the product but fixed costs are likely to remain at the same level of £10,000 over the next four years. In calculating profits over the next four years, the tax rate can be taken as 20%. Kaleidoscope and Orange intend to sell the Concept Tent at £65 for the first year with an annual increase of £2.00 thereafter. Task 1 (a) Kaleidoscope and Orange have asked you to develop a financial planning model so that they can determine how net profits would be affected by changes in planned sales volume and product price over years 2 to 4. (b) Having built the financial planning model, Kaleidoscope and Orange now want to look at three ‘what-if’ scenarios. · Scenario 1: Suppose inflation is predicted to be 2.5% during the second year and 3% thereafter. What would be the profitability of the new carving knife in these circumstances? · Scenario 2: Suppose the Company decides to sell 3% more units per year as well as increasing the current selling price by 10% per year. What would be the effect on the ‘net profit after tax’ for each year? · Scenario 3: Suppose that Kaleidoscope and Orange decides to vary the projected sales volume over a range from -5% to 10% of the initial assumption. The company wants to see how the ‘Net profit after tax’ would change as the projected sales volume changes.
