Assignment TakenTo achieve Break-Even within first year of operations

Case UnderstandingAirway Delivery is a courier company, which has branches across India and delivers to most pin-codes. Company’s Board has decided to venture into ‘Hyper Local Delivery space’ and want to conduct local delivery through drones. As a rule, all flying objects in India, needs to take permission from (DGCA) Director General of Civil Aviation. Your company has all necessary permissions. Trials are conducted at beyond the visual line of sight (BVLOS) and successful test deliveries are conducted. Company has decided to start this venture as “Short Range Drone Based Services” instead of Long-Range Drone Flight operations due to high purchase cost of “Long range drones”. Company Intend to build an end-to-end Drone Operations & Management Platform through which a rapid scaling of business can be achieved. Company has performed several successful beta testing deliveries for initial participants such as food delivery companies, few Pharma Chains & Internal Local deliveries and looking forward to exploring more business areas for cost-effective cargo deliveries. we need to prepare a budget which can help company reach break even within first year of it's operation and can expand in future.

BCS Solution Summarythe solution contains facts and numbers about how to reach break even within first year of operation. company needs to make certain number of revenue to reach break even per day. solution also contains the expansion plan of drone facility. it suggests how drones facility can expand further in the future. the cost of drones have been assumed as fixed cost as it is first year of business plan and drones are the product providing services.

Solution

We have following costs given :

particular	quantity	Cost per unit
Short range drones	4	1,25,000
Long range drones	1	4,00,000
Drone operators	4	50,000
Management team	5	1,00,000
Software	1	25,00,000
Software development team	2	70,000
Support staff	4	20,000

Division is sharing office space with parent entity & contributing Rs.30,000 including rent, internet, phone & electricity etc. for their share of facilities utilization.

Short range drones total cost : 125000 * 4 = 5,00,000

Long range drones total cost : 400000 * 1 = 4,00,000

Software : 2500000 * 1 = 25,00,000

 

Salaries (yearly) :

 Drone operators : 24,00,000

Management team : 60,00,000

Software development team : 16,80,000

Support staff : 9,60,000

 

Assuming that division sharing office contributes Rs.30,000 is monthly, the yearly cost will be Rs.3,60,000

Total cost for the year is Rs.1,48,00,000.

 

To reach the break-even we have to generate a revenue of total Rs.1,48,00,000. We have to earn a total of Rs. 40,548 per day to meet the required amount.  (14800000/365 = 40.548)

 

Category of Couriers Courier weight Price
A	0.1 grams to 500 grams	60 Rs.
B	501 grams to 1 Kg	80 Rs.
C	from 1.01 Kg to 5 Kg	100 Rs. /Kg
D	5.01 Kg to 10 Kg	110 Rs. /Kg

The price table for local deliveries charges by the company:

In case of category A:

In this category we are earning Rs.60 per delivery we make. To reach the required goal we will have to do a total of 676 deliveries.

(40548/60 = 676)

In case of category B:

In this category we are earning Rs. 80 per delivery we make. To reach the required goal we will have to do a total of 507 deliveries.

(40548/80 = 507)

In case of category C:

In this category we are earning Rs. 100 per delivery we make. To reach the required goal we will have to do a total of 406 deliveries.

(40548/100 = 406)

In case of category D:

In this category we are earning Rs. 110 per delivery we make. To reach the required goal we will have to do a total of 367 deliveries.

(40548/110 = 367)

EXPANSION PLAN

company can reach break even by earning a total of Rs.40,548 per day. company should use category A as medium to earn more. Airway needs to use more small ranged drones instead of long ranged drones as they are more beneficial.

small raged drone cost - 1,25,000

long range drone cost - 4,00,000

we can purchase 3 small range drones at the price of one long ranged drone.

3 small ranged drones can carry more weight than one long ranged drone.

Conclusioni'd like to conclude that company can reach it's break even within one year of operations by making a certain of deliveries as per any category of any four. company should use short ranged drones instead of long ranged drones as they are more beneficial. long ranges drones should be used in case of emergencies. company can generate more revenue by using category A for deliveries. company should also open more drone facilities in every area near branch offices to cover more ground and deliver more.