Performance management assignment 3 Essay Example | Topics and Well Written Essays - 1000 words

Performance management assignment 3 - Essay Example Projection: Based on the projection given, H.C.P is a complete loss making venture. First of all there is an error in projection. According to the business plan H.C.P is saying they will adopt selling price of ?10,000 and make a profit margin of 20% yet production cost per car is ?10,666. Based on supply and demand findings the optimal gross profit attainable is approximately ?15 million which is less than ?300 million needed to breakeven. In order for H.C.P to achieve 15% annual minimum return on capital employed the need to attain gross profit of ?450 million. The maximum production capacity is 90,000 cars per year. Assuming H.C.P reach maximum production level, they will have to sell each car at ?15,666 to attain 15% minimum return on capital employed but according to demand and supply curve that volume of sales can only be attained when the price per is ?9,000 which is below production cost. This leaves H.C.P at a paradox. Looking at the competitors price range the minimum and ma ximum price per car is ?10,400 and ?11600 respectively. Using these parameters we can determine what are optimal production, sales volume and selling price. How H.C.P can Attain 15% minimum return on capital employed: We know it’s difficult to attain maximum production capacity of 90,000 per annum; therefore we need to setup optimal production capacity based on percentage. ... 50,080 17,942,480 14,989,920 53,720,000 44,880,000 214,880,000 179,520,000 572,977,520 478,690,080 7,198,480.00 14,989,920.00 Â   Â   300,000,000.00 300,000,000.00 300,000,000.00