Davey 

Brothers Watch Company Case
Name: Nikam Prashant L. Roll No: 2022PGP258
Section: D
Assumptions:
1. For new Machine - 10 year loan 3. All Calculations done at 5 yr loan 10%
2. Per Institute visit - 5 Rs/institute rate except where mentioned explicitly.
 Cost Information
Item Cost Units
1 Photocopy machine (35000) 7000 per annum
2 Drum & film 1400 per annum
3 Finance cost (10%) 3500 per annum
4 Repair & Maintenance 1000 per annum
5 Electricity Shop 3000 per annum
6 Shop Rent 1200 per annum
7 Power Consumption 0.04 per unit
8 Paper Consumption 0.2 per unit
9 Toner 0.032 per unit
10 Foregone Salary 30000 per annum
Price Information
 Prices Component Price (In Rs.)
1 Selling Price 1 0.75 0.5
2 Variable cost 0.28 0.28 0.28
3 Contribution 0.72 0.47 0.22
4 Fixed cost 12900 12900 12900
5 Foregone Salary (opp. cost) 30000 30000 30000
6 Break Even 17917 27447 58636
7 Monthly Units 1493 2287 4886
Monthly Units approx 1500 2300 4900
8 Daily Units 50 77 163
Daily Units approx 50 80 160
9 Break Even (opp. cost) 59583 91277 195000
10 Monthly Units 4965 7606 16250
Monthly Units approx 5000 7610 16250
11 Daily Units 167 254 542
Daily Units approx 170 250 540
a) Break Even (units) (fixed cost + (opp. cost if applicable))/contb. per unit
b) Break Even at diff. prices Rs. 1 Rs.0.75 Rs.0.50
B.E fixed cost 17917 27447 58636 per annum
B.E at fixed + opp. Cost 59583 91277 195000 per annum
c) Borrowing from bank (35000- 5yrs) 7000 per annum
Finance cost (15%) 5250 per annum
Fixed cost 14650 14650 14650
Fixed cost + opp.cost 44650 44650 44650
B.E at diff. prices Rs. 1 Rs.0.75 Rs.0.50
B.E units 20347 31170 66591
per annum
B.E (opp.cost) units 62014 95000 202955 per annum
d) New Machine cost (50000) 5000 per annum
Finance Cost (10%) 5000 per annum
Fixed Cost 11400 11400 11400
B.E at diff. prices Rs. 1 Rs.0.75 Rs.0.50
B.E units 15833 24255 51818
per annum
B.E (opp.cost) units 57500 88085 188182 per annum
e) Profit of Rs. 2000 Rs. 1 Rs. 0.75 Rs. 0.50
Copies at fixed cost 51250 78511 167727 per annum
Copies at fixed + opp.cost 92917 142340 304091 per annum
f) 60 copies at 75 paisa
Profit/Loss when only F.C -4440 loss per annum
Profit/Loss when F.C + O.C -34440 loss per annum
g) Rs. 1 for retail and Rs. 0.75 for institution customers
Contribution of Rs. 1 Customers 10800
B.E units of institution customers 4468 fixed cost 68298
fixed + opp.
 B.E units of institution customers 15268 79098
h) Door step service to institutions
Institution visit cost 5 per institute
No. of institutes (3 branches, 1 LIC
branch, 1 P.O, 1 T.C, 1 P.S, 1 School, 9
1 College)
Visit Cost 13500 per annum
B.E at diff. prices Rs. 1 Rs.0.75 Rs.0.50
B.E units 36667 56170 120000 per annum
B.E (opp.cost)units 78333 120000 256364 per annum
i) Delivery Boy cost (1500 p.m) 18000 18000 18000
New Fixed Cost 30900 30900 30900
New Fixed + Opp. Cost 60900 60900 60900
B.E units at fixed cost 42917 65745 140455 per annum
B.E units at fixed + opp.cost 84583 129574 276818 per annum
Relevant costs: Photocopy machine,Drum &Film, Finance costs, Repair and
j)
Maintenance, Power and Paper Consumption, Toner cost
1. Yes, he should do Photocopy Business with new machine and financing from his cousin.
2. He should focus on Photocopy business as other business are on declining side.