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could you please create a pro forma statment based upon this company's projections

A wooden version of the mounted display case enjoyed a great deal of sales success in the years leading up to this point. Advertising in only one hobby magazine produced sales of over $50,000 in the first year. These magazine ads generated sales for five years, with a number of sales occurring after the ads were cut at the beginning of 2006 . The sales of the wooden display case provided evidence that a market for this type of product existed. Exhibit C7.2 shows the sales of the wooden display case; however, one must keep in mind that promotions for this product were cut in year 5 . The new product would be an injection molded, wall-mounted, display case designed to house twenty die-cast cars (Hot wheels and Matchbox cars). The case is fahioned in the design of an eighteen-wheeler truck, it is 28 inches long, 81/2 inches high, and 3/4 inches deep. The estimated production cost per unit is $7.50. The product would be shipped in a protective cardboard box, the same type of package used by Unique Display Cases to send the wooden display cases to its customers. This package costs approximately $0.80 per unit. The two target markets identified by the Smiths (collectors and children) complicate the product decision. In order for the same product design to relate to different market segments with such vast distinctions, they felt the product must differ in some way. One inexpensive means of changing the product might be accomplished by varying the color. For the product to appeal to the collector's market segment, a wood finish appearance could be used. The children's segment could implement a more "playful" image with red, blue and yellow to better relate to this target market. Competitive Analysis Presently, there was no direct competition for the Unique Display Cass's mounted display case. However, there are a few similar products that could pose a threat. A handful of companies produce plastic display cases designed and marketed to display much larger cars. These cases could be used to showcase from 10 to 20 die-cast cars; however they do not have any eye-catching features. They are made up of plastic bases and clear plastic detachable dome-like boxes. Companies also produce these cases to mount on a wall. Another possible more direct competitive threat is the carrying cases for small die-cast cars. There are also numerous types of cases designed to house many die-cast cars; yet, they are not fashioned to be fixed display cases. Rather, these cases are designed to transport or store the toy cars. Exhibit C7.3 shows some competitive cases available and their prices. EXHIBIT C7.2 Wooden Case Sales by Year EXHIBIT C7,3 Carrying Cases and Prices Financial Analysis The Smiths need to develop an analysis of their breakeven point for the plastic display case based on sales of the product directly to the consumer as well as through retailers. If the product were sold to retailers, the price would have to provide retailers with an adequate markup. Exhibit C7.4 presents the expected cost structure for the Unique Display Cases display case developed by their accountant. Based on competitive prices, the Smiths expected to offer their product in direct to consumer sales for $24.99 plus $2.99 for shipping and handling. The price to retailers would have to be negotiated but would be 3040% less to aflow an adequate markup for the retail firms. The production cost of $7.50 was based on a production run of 5000 units in one color. At 10,000 or more units, production cost would drop to $5.75 per unit. The company that would produce the plastic unit had production capacity of 25,000 units a year. The injection model itself would have to be designed and manufactured by a design company. The cost of the mold was estimated to be about $10,000 and would be amortized over a 5 year period. The Smith's need to estimate how much additional investment is needed to launch the new product, including the injection mold, purchase of an inventory of shipping boxes, and an investment in inventory of 5000 display cases, and operating capital to cover expenses until the sales volume was high enough to cover operating expenses. They also need financial projections for the product to determine the potential profitability at various sales volumes from a low estimate of 500 units to higher levels of sales like 1000 . 5,000 , and 10,000 units. These estimates or pro forma income statements would be needed to borrow capital to launch the product. Marketing the New Display Case Their previous marketing approach had been fairly successful for the wooden display case, although they felt they were in the dark about what past customers thought. Smith wondered how in the future, they could obtain feedback from purchasers and exactly what information should be sought to be managerially useful. The ads they had run produced sales for several years. However, they were not sure about how to reach the children's market or how to get their product into retail stores. The Smiths wondered if there might be a number of children's magazine through which to promote the product or the product or if there were some good specialty magazines carrying unique products that could generate mail orders. They had also thought about approaching one of the toy car manufacturers and trying to negotiate a license agreement for them to manufacture and distribute the display case, but were not sure about the implications of such a move

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