IENG377 Engineering Economy Case Study: Mountaineer Manufacturing You are starting a manufacturing company in Pittsburgh, Pa. Given the following information, what are the projected income statements for this company for the next 5 years? Management/Administration cost: CEO (Your Salary) $150,000 VP Marketing $100,000 VP Sales S125,000 Chief Technology Officer $100,000 VP Operations $100.000 Other Administration Personnel Salary Combined: 400,000 Benefits for above personnel: Add 40% of total salary Inflation: Above salaries are for year 1 . These go up by inflation of 2% year. Total Salary Year Year 1 Year 2 Year 3 Year 4 Year 5 Total Salary+Benefits Facilities: Lease Plum Industrial Court Building, 20,000 sq,.ft. @ s16/sq.ft. per year Included rent and utilities. Lease remains the same over the next 5 years. Depreciation of Machinery: Purchase 5 different automated machines for flexible work cell. The total cost of the machines is spread out over 5 years per IRS rules. Use numbers in chart below for total year by year depreciation in income statement YearDepreciation Year 1 Year 2 Year 3 Year 4 Year 5 80000 150000 140000 140000 \' 180000
Total Salary for year 1 = $150,000+$100,000+$125,000+$100,000+$100,000+$400,000 = $975,000
Benefits in year 1 = 40% of total salary = 40%*$975,000 = $390,000
Calculation of total salary and benefits for 5 years (Amount in $)
Management/Administration cost each year = Total salary and benefits
Facilities cost each year = 20,000 sq. ft.*$16/sq.ft. = $320,000
Sales Forecast (Amount in $)
Direct Product Costs (Amount in $)
Income Statement for the next 5 years (Amount in $)
| Year | Total Salary (2% inflation each year) (i) | Benefits (40 % of total salary) [(ii) = (i)*40%] | Total salary and benefits [(i)+(ii)] |
| Year 1 | 975,000 | 390,000 | 1,365,000 |
| Year 2 | (975,000*1.02) = 994,500 | 397,800 | 1,392,300 |
| Year 3 | (994,500*1.02) = 1,014,390 | 405,756 | 1,420,146 |
| Year 4 | (1,014,390*1.02) = 1,034,678 | 413,871 | 1,448,549 |
| Year 5 | (1,034,678*1.02) = 1,055,372 | 422,148 | 1,477,520 |
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