Surefloat Boat Builders

Calculation of Cummulative Cash Flow Position at the end of 12 months

Step 1
Step 2

We will calculate the labour hrs required for cummulative units

A person works 20 days/month and 8 hrs/day
Manpower equivalent
160

Cummulative Units
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36

Labour hrs
500
400
351
320
298
281
267
256
246
238
231
225
219
214
209
205
201
197
194
191
188
185
182
180
177
175
173
171
169
167
166
164
162
161
159
158

total labour hrs for units produced

900
1251
1571
1869
2150
2417
2673
2920
3158
3389
3614
3833
4046
4255
4460
4661
4858
5052
5243
5430
5615
5797
5977
6155
6330
6503
6674
6843
7010
7176
7340
7502
7663
7822
7980

units
900 for 2 units

1773 for 6 units

2185 for 10 units

1816

37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83

156
155
154
152
151
150
149
148
147
146
145
144
143
142
141
140
139
138
138
137
136
135
135
134
133
132
132
131
130
130
129
129
128
127
127
126
126
125
125
124
124
123
122
122
122
121
121

8136
8291
8445
8597
8749
8899
9048
9196
9342
9488
9633
9777
9920
10062
10203
10343
10482
10621
10758
10895
11031
11166
11301
11435
11568
11700
11832
11963
12094
12223
12353
12481
12609
12736
12863
12989
13115
13240
13365
13489
13612
13735
13858
13980
14101
14222
14343

2374

2119

1570

1486

84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130

120
120
119
119
118
118
117
117
117
116
116
115
115
115
114
114
114
113
113
112
112
112
111
111
111
110
110
110
109
109
109
109
108
108
108
107
107
107
107
106
106
106
105
105
105
105
104

14463
14583
14702
14821
14939
15057
15174
15291
15408
15524
15640
15755
15871
15985
16099
16213
16327
16440
16553
16665
16778
16889
17001
17112
17223
17333
17443
17553
17662
17772
17880
17989
18097
18205
18313
18420
18527
18634
18741
18847
18953
19058
19164
19269
19374
19478
19583

1418

1361

1312

1270

131
132
133
134
135
136
137
138
139
140
141
142

104
104
104
103
103
103
103
102
102
102
102
101

19687
19791
19894
19998
20101
20204
20306
20409
20511
20613
20714
20816

1233

Step 3
Months
Units produced
Selling Price
total inflow (A)

Statement of Cash Flow for 12 months

1
2
3
2
6
10
0
12000
12000
0
24000
72000

manpower equivalent
5.6250

11.0815

Outflow
Wages
direct materials(6000 per yacht)
variable materials(10% of dm)
fixed administrative costs
monthly outflow (B)
net monthly cash flow(A-B)
cumulative cash flow position

5625 11081.48 13658.07

12000
36000
60000
1200
3600
6000
10000
10000
10000
28825
60681
89658
-28825
-36681
-17658
-28825
-65507
-83165

Solution: the cummulative cash flow at the end of 12 months is $315608

13.6581

11.3476

14.8361

13.2417

9.8129

9.2869

8.8604

8.5044

8.2007

7.9372

7.7053

r 12 months
4
10
12000
120000

5
15
12000
120000

6
15
12000
180000

7
12
12000
180000

8
12
12000
144000

9
12
12000
144000

11347.64 14836.07 13241.67 9812.947 9286.866 8860.353

60000
90000
90000
72000
72000
72000
6000
9000
9000
7200
7200
7200
10000
10000
10000
10000
10000
10000
87348
123836
122242
99013
98487
98060
32652
-3836
57758
80987
45513
45940
-50512
-54348
3410
84397
129910
175850

10
12
12000
144000

11
12
12000
144000

12
12
12000
144000

8504.39 8200.727
72000
72000
7200
7200
10000
10000
97704
97401
46296
46599
222145
268745

7937.2
72000
7200
10000
97137
46863
315608

Experience Curve
To analyze the given situation, the president of firm A need to compare the profit of firm A and B
By taking into consideration the impact of learning curve on the cost.

no of units
Cost of 1st unit
experience curve
current price

Firm A
Firm B
100000
5000
100
150
0.95
0.85
85
40

value of Beta for learning curve using log

-0.02228 -0.07058
0.30103 0.30103
beta
-0.074 -0.23447
therefore, amount required to make 500th unit
53.24442 20.36157
Profit

31.76

19.64

Therefor we could clearly conclude that the firm B is having an advantage of 85% experience curve. Therefore
its cost of producing 500th unit is less as compared to FIRM A. So to take more benefits and to take an edge over its
competitors, it is justified on part of Firm B to cut its price from $85 to$40.
Firm A after analyzing the situation should try to improve its experience curve and try to retain its market leader position as F

an edge over its

arket leader position as FIRM B is cutting A's market share

cum units labour hrs labour hrs for unit

1
400
2
320
720
3
281
4
256
5
238
775
6
225
7
214
8
205
9
197
840
10
191
11
185
12
180
13
175
14
171
901
15
167
16
164
17
161
18
158
19
155
805
20
152
21
150
22
148
23
146
24
144
740
25
142
26
140
27
138
28
137
29
135
693
30
134
31
132
32
131
33
130
34
129
656
35
127
36
126
37
125
38
124
39
123
626
40
122
41
121
42
120

month

product

3rd

4th

5th

6th

7th

8th

9th

10th

11th

43
44
45
46
47
48

119
118
117
117
116
115

601 12th

sp=

40000

direct labour cost=

35 direct mat=

month
units
cash inflow
cash outflow
initial investment
direct labour cost
indirect labour cost
direct material
indirect mat cost
total monthly outflow
net monthly cash flow
cummulative cash flow

3
2
80000

4
3
120000

5
4
160000

6
5
200000

7
5
200000

8
5
200000

9
5
200000

408000
25200
5040
14000
1400
453640
-373640
-373640

36000
27129
5426
21000
2100
91655
28345
-345296

36000
29417
5883
28000
2800
102101
57899
-287396

36000
31551
6310
35000
3500
112361
87639
-199757

36000
28162
5632
35000
3500
108294
91706
-108052

36000
25903
5181
35000
3500
105584
94416
-13636

36000
24244
4849
35000
3500
103592
96408
82772

THEREFORE AT THE END OF 9TH MONTH CUMMULATIVE CASH FLOW IS 22364

7000

10
5
200000

11
5
200000

12
5
200000

36000
22949
4590
35000
3500
102039
97961
180733

36000
21899
4380
35000
3500
100779
99221
279954

36000
21022
4204
35000
3500
99727
100273
380227