Cost Structure:

The organization cost structure would be Cost-Driven. Which means that we are focused on
keeping costs or expenses down. More automation or outsourcing would be done to keep internal
costs low, resulting in competitive pricing. The core of our model is to operate with excellence.
Since our margins are small, we have to rely on economies of scale and scope to achieve
satisfactory returns. The economies of scale will help in cost-saving as we would purchase large
volume which will give discounts, resulting in lower costs per unit. Economies of scope will help
in cost savings by reaching the market leadership in our product line and will expand into other
consumables.
To acquire a comprehension of what our cost structure would be, we made an expense model.
For this, our team have shaped a spreadsheet comprising of evaluations for every cost that could
incur:
Fixed Cost: Variable Cost
Machinery and Equipment Piece rate wages
Direct Labor Recruitment Cost
Factory Mortgage Direct Materials
Warehouse Mortgage Indirect Materials
Insurance Shipping Cost
Property Tax Direct Selling Cost
Information technology Utilities Bills
Registration Commission
Professional fees (Consultant) Bonuses to Labor
Depreciation Packaging Cost
Income Tax Payroll taxes
Warranty Claims Travel and Entertainment for Employees
Office Supplies Product returns
Commission Early payment discounts
Legal and audit fees Licensing
Interest Faulty Materials
Marketing Expense Wastages
Amortization Indirect Labor
Printing Machine Production Supplies
Startup Cost for 1 month:
Company Name
Cost Structure
From May to June 2021
Variable Cost Rupees
Direct Material PKR 50,000.00
Indirect Materials PKR 10,000.00
Transportation Cost PKR 25,000.00
Initial Utility bills PKR 50,000.00
Licensing PKR 5,000.00
Initial Recruitment cost PKR 20,000.00
Direct Selling Cost PKR 15,000.00
Commission PKR 25,000.00
Packaging Cost PKR 5,000.00
Product returns PKR 3,000.00
Indirect Labor PKR 30,000.00
Early payment discounts PKR 5,500.00
Income Tax PKR 8,000.00
Warranty Claims PKR 3,500.00
Faulty Materials PKR 7,000.00
Material Wastage PKR 5,000.00
Piece rate Wages PKR 200.00
Production supplies PKR 20,000.00
Total Variable Cost PKR 287,200.00
Fixed Cost
Direct Labor (20,000*4) PKR 80,000.00
Machinery and Equipment PKR 50,000.00
Prrniting Machine PKR 20,000.00
Factory Mortgage PKR 300,000.00
Warehouse Mortgage PKR 100,000.00
Insurance PKR 5,000.00
Information technology PKR 25,000.00
Registration PKR 7,000.00
Professional fees (Consultant) PKR 25,000.00
Office Supplies PKR 50,000.00
Legal and audit fees PKR 25,000.00
Interest PKR 2,000.00
Marketing Expense PKR 80,000.00
Amortization PKR 5,000.00
Total Fixed Cost PKR 774,000.00
Recurring Cost for 1 month:
Company Name
Cost Structure
From August to September 2021
Variable Cost Rupees
Direct Material PKR 70,000.00
Indirect Materials PKR 10,000.00
Transportation Cost PKR 25,000.00
Utility bills PKR 35,000.00
Direct Selling Cost PKR 15,000.00
Commission PKR 30,000.00
Packaging Cost PKR 5,000.00
Product returns PKR 5,000.00
Indirect Labor PKR 15,000.00
Early payment discounts PKR 8,000.00
Income Tax PKR 10,000.00
Warranty Claims PKR 5,000.00
Faulty Materials PKR 2,000.00
Material Wastage PKR 3,500.00
Piece rate Wages PKR 210.00
Production Supplies PKR 15,000.00
Total Variable Cost PKR 253,710.00
Fixed Cost
Direct Labor (25,000*4) PKR 100,000.00
Factory Mortgage PKR 50,000.00
Warehouse Mortgage PKR 40,000.00
Insurance PKR 5,000.00
Information technology PKR 5,000.00
Professional fees (Consultant) PKR 25,000.00
Office Supplies PKR 35,000.00
Legal and audit fees PKR 10,000.00
Interest PKR 2,000.00
Marketing Expense PKR 80,000.00
Amortization PKR 5,000.00
Licensing PKR 5,000.00
Depriciation PKR 2,500.00
Total Fixed Cost PKR 357,000.00
Total Recurring Cost PKR 610,710.00
Units Produced= 35000
Product Cost structure:
Fixed Cost: Cost Cost per Unit
Direct Labor PKR 100,000.00 PKR 2.86
Manufacturing Overhead PKR 195,000.00 PKR 5.57
Variable Cost
Direct Materials PKR 70,000.00 PKR 2.00
Piece rate wages PKR 210.00 PKR 0.01
Production Supplies PKR 15,000.00 PKR 0.43
Commission PKR 50,000.00 PKR 1.43
Total Product Cost: PKR 430,210.00 PKR 12.29

Customer Cost structure:

Fixed Cost: Cost Cost per Unit
Administrative Overhead for
customer warranty claims and
services PKR 20,000.00 PKR 0.57
Variable Cost
Cost of Selling goods PKR 50,000.00 PKR 1.43
Sales return PKR 3,000.00 PKR 0.09
Credits received PKR 4,000.00 PKR 0.11
Total Customer Cost: PKR 77,000.00 PKR 2.20

Service Cost structure:

Fixed Cost:
Administrative Overhead PKR 80,000.00 PKR 2.29
Variable Cost
Staff Wages PKR 100,000.00 PKR 2.86
Bonuses PKR 20,000.00 PKR 0.57
Tax PKR 10,000.00 PKR 0.29
Travel and entertainment PKR 36,000.00 PKR 1.03
Total Service Cost: PKR 246,000.00 PKR 7.03

Product Line Cost structure:

Fixed Cost: Cost Cost per Unit
Administrative Overhead PKR 80,000.00 PKR 2.29
Manufacturing Overhead PKR 195,000.00 PKR 5.57
Direct Labor PKR 100,000.00 PKR 2.86
Variable Cost
Direct Materials PKR 70,000.00 PKR 2.00
Production Supplies PKR 15,000.00 PKR 0.43
Commission PKR 50,000.00 PKR 1.43
Revenue Streams

Manufacturing Revenue Model:

Our Company Follows a manufacturing revenue model by making money by transforming raw
materials into finished goods that can be sold. Our Revenue is generated by creating value and
then selling the products to wholesalers, retailers and end users who are willing to pay for them.
We will charge customers on one time fee. Which means that customers will have to pay only
once when they buy our product.
Asset Sale: We are selling physical product to our customers.
Our Revenue Model will be based on Variable Income.
For August To September 2021our:
Total Fixed Cost = 357,000
Total Variable Cost = 243,710
And
One Time Cost = 500,000
Profit Margin:
Average Cost of Product = PKR 13
Average Selling Price = PKR 15
Profit Margin = 15%
Average Sales Projection for one month:
Capacity 50,000.00
Actual Production 35,000.00
Average Rate PKR 15.00
Sales PKR 525,000.00
[Company Name]
Profit and Loss (P&L) Statement
[PKR Thousands] 2021 2021 2022
Aug Sep Nov Dec Jan Feb March April
Asset Sales 587.0 596.3 605.8 615.4 625.2 635.1 645.2 655.4
Indirect Customers 145.6 147.9 150.2 152.6 155.0 157.5 160.0 162.5
Returns, Refunds, Discounts (21.0) (21.3) (21.7) (22.0) (22.4) (22.7) (23.1) (23.5)
Total Net Revenue 711.6 722.9 734.3 746.0 757.8 769.9 782.1 794.5

Cost of Goods Sold 269.6 273.9 278.2 282.7 287.1 291.7 296.3 301.0
Gross Profit 442.0 449.0 456.1 463.3 470.7 478.2 485.7 493.5

Expenses
Advertising & Promotion 18.7 19.1 19.5 19.8 20.2 20.6 21.0 21.5
Depreciation & Amortization 7.5 7.5 7.5 7.5 7.5 7.5 7.5 7.5
Insurance 1.1 1.1 1.1 1.2 1.2 1.2 1.2 1.3
Maintenance 5.7 5.8 5.9 6.0 6.2 6.3 6.4 6.5
Office Supplies 2.8 2.9 2.9 3.0 3.0 3.1 3.2 3.2
Rent 5.8 5.9 6.0 6.2 6.3 6.4 6.5 6.7
Salaries, Benefits & Wages 251.2 256.2 261.3 266.5 271.8 277.2 282.7 288.3
Telecommunication 1.5 1.5 1.6 1.6 1.6 1.7 1.7 1.7
Travel 2.3 2.3 2.4 2.4 2.5 2.5 2.6 2.6
Utilities 1.4 1.4 1.5 1.5 1.5 1.5 1.6 1.6
Other Expenses 3.8 3.9 4.0 4.0 4.1 4.2 4.3 4.4
Total Expenses 301.8 307.6 313.6 319.7 325.9 332.2 338.7 345.3
Earnings Before Interest & Taxes 140.2 141.3 142.5 143.6 144.8 145.9 147.1 148.2

Interest Expense 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5
Earnings Before Taxes 137.7 138.8 140.0 141.1 142.3 143.4 144.6 145.7

Income Taxes 10.9 10.6 10.3 10.0 9.7 9.3 8.9 8.5
Net Earnings 126.7 128.2 129.7 131.1 132.6 134.1 135.6 137.2
Life Time Value:

Lifetime Value (LTV) of Customer

Assumptions
Average Order Value (AOV) PKR 120.00
Contribution Margin (CM) per Order PKR 43.00
# of Orders per Month 1.75
Monthly Revenue per Customer PKR 210.00
Contribution Margin %/Order 36%
Annual Contribution Margin/Custome PKR 75.25
Customer Retention Rate 65%
Hurdle Rate / Discount Rate 15%

Period # Retention CM/Customer CM/Customer Cumulative LTV PV LTV Cumulative PV L

Rate After Retention
August 1.0 100.0% PKR 75.25 PKR 75.25 PKR 75.25 PKR 65.43 PKR 65
September 2.0 65.0% PKR 75.25 PKR 48.91 PKR 124.16 PKR 36.98 PKR 102
October 3.0 42.3% PKR 75.25 PKR 31.79 PKR 155.96 PKR 20.90 PKR 123
November 4.0 27.5% PKR 75.25 PKR 20.67 PKR 176.62 PKR 11.82 PKR 135
December 5.0 17.9% PKR 75.25 PKR 13.43 PKR 190.05 PKR 6.68 PKR 141
January 6.0 11.6% PKR 75.25 PKR 8.73 PKR 198.78 PKR 3.77 PKR 145
February 7.0 7.5% PKR 75.25 PKR 5.68 PKR 204.46 PKR 2.13 PKR 147
March 8.0 4.9% PKR 75.25 PKR 3.69 PKR 208.15 PKR 1.21 PKR 148
April 9.0 3.2% PKR 75.25 PKR 2.40 PKR 210.55 PKR 0.68 PKR 149
May 10.0 2.1% PKR 75.25 PKR 1.56 PKR 212.11 PKR 0.39 PKR 150
The organization Revenue streams are indirect and direct costumers and consumers. To identify
and manage our revenue streams we will apply strategies which will work:

 Advertising
Such platforms like YouTube, Twitter, Google, and Facebook, along with many other free-to-
download apps and services. We will advertise our product from these apps and services which
will gain attention by our target market.

 Affiliate Marketing.
This strategy is based on making commissions by referring other products and services to
audience. We will select merchants in the same industry and recommend only the products we
find beneficial to our users.

 Sponsorship
As we are doing a startup business, we can get help from the individuals. For that, we will
include a donate button or a request to purchase our product so people can support us from
anywhere.
.