WINTER SEMESTER 2019-20

Course: Lean Startup Management Code: MGT1022

Faculty: Dr. Jayakrishna K Slot: TE1

Assignment -4

Submitted by:
• 18BME0222: L Sai Raghavendra Reddy
• 18BCE0160 : D Jeevan Kishore
• 17BME0232 : Aditya Kumar
• 17BCL0298 : Prasun Kumar Sinha
• 17BCE0990 : Kunwar Taneja
• 17BME0194 : Anurag Singh
Marketing Strategies:
● Initially we would sell the product to the people we know. Once these people are users, we
would try to convert them from users to sales people for the product.

● Since our main target are the rural areas, recruiting sales agent for door to door sales.

● Advertising our product through social media, newspapers etc.

● Contacting the head of the villages and spreading awareness about the necessity of pure
drinking water and make them convince the people into buying our product.

● Once the business is running effectively, we can put our product for online sale on shopping
websites.

● Have Tie-ups with NGO’s in order to advertise their product in rural areas especially.

● Sample users will be given the prototype and their feedback would be taken.

● User-user marketing will be promoted.

Financial Planning:
In order to estimate the price of our product first, we need to know the basic investment for our
product- (per bottle140/-)
Short term goals: To manufacture and sale at least 100 units of the product near the locality.
Analyze the factors like time, cost, profit etc. for the next sale. According to the calculation
predict the sale for large number of quantities. According to the response, check and sell about
500-1000 units of product.
Intermediate planning: How to use other techniques for much profits, to recognize the type of
survey needs to done in order to find various problem that can occur in future. Sell at least 10000
units and increase the popularity in nearby states. Also, recognize the other market area where
the sale can be maximized. Also increase reach in other states. Use media for popularity.
Long term plans: To increase reach at least 10 states of India and also reach international
vendors. To make sure the company has stable profit in other markets and always remain n
profits. Also try other kind of products under same company. The financial requirement for long
term plans is 10 times more than required for intermediate planning.

A. Initial Expenditure:
For 100 Bottles
Prime Cost
a. Direct material cost- (Plastic, activated carbon, coffee filter, cotton) = 800/-
b. Direct labor cost – 25/hr.
c. Direct expenses- 200/-
Prime cost assuming 25hrs of labor = 1100/-
Factory Cost
Work expenses – 200/- (Initial Assumption)
Indirect labor – 15/hr.
Rent and taxes of factory – 10,000/-
Repairs- 1000/-
Factory cost= 12,360/-
Office Expenses
Stationary – 500/-
Office Cost = 12,860/-
Selling Expenses
Packing = 10/per bottle
Total = 1000/-
Cost of sales = 13,860
Therefore, cost of one product = 140/-
Profit margin 10% This implies Selling Price = 155/- (Approximate)

B. Running Expenses:
1. Selling and distribution cost = 12/per bottle
2. Advertising = 0/- (Social Media)
3. Bad depts (variable)
4. Sale Staff salary (on commission 12/-)
 Selling expenses are the costs associated with distributing, marketing and selling a
product or service. They are one of three kinds of expense that make up a company’s
operating expenses. The others are administration and general expenses. Selling expenses
are categorized as indirect expenses on a company’s income statement because they do
not contribute directly to the making of a product or delivery of a service. Some
components can change as sales volumes increase or decrease, while others remain
stable. Hence, selling expenses are semi-variable costs.

C. Maintaining Expenses:
1. Indirect labor cost = 15/hr.
2. Repairs = 1000/-
3. Depreciation(variable)
4. Carrier outwards (variable)
These expenses are mostly variable can cannot be predicted easily. Maintenance expenses
are the costs incurred to keep an item in good condition or good working order. When
purchasing an item that requires upkeep, consumers should consider the initial price tag
as well as the item's ongoing maintenance expenses.

Break-Even Analysis:

Break-even Analysis (BEA) is a graphical representation of the cost-volume relationship. Break-

even Point (BEP) represents the level of output at which there is no profit and no loss. Profit is
the difference between total revenue and total production cost

𝑇𝑜𝑡𝑎𝑙 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 = 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑢𝑛𝑖𝑡𝑠 𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑑 × 𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡

𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 = 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑢𝑛𝑖𝑡𝑠 𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑑 × 𝐶𝑜𝑠𝑡 𝑝𝑒𝑟 𝑢𝑛𝑖t

Break Even Point = Fixed / Contribution per unit

= 11,260/135

= 84 units