One of the most daunting tasks for any entrepreneur is estimating demand for what he or she is selling, particularly if the product is new to the world or very different from what currently exists. Pai-Ling Wong has developed a robotic device designed to deliver food and coffee to people on the campus of the university where she is a researcher. The university is serving as a beta test site to refine the robot's functionality. As part of her effort to plan for the commercialization of her robot, Pai-Ling needs to calculate potential demand. Because she is aware that entrepreneurs frequently overestimate the level of sales they can realistically achieve in the beginning, she has decided to triangulate demand from three different points of view to get a sense of total demand.

In addition to calculating demand, Pai-Ling is well aware that if she doesn't get her expenses right, she could burn through her limited capital before getting her product to market. At the same time, she knows that the probability of getting expenses exactly right is zero.

 

What three perspectives should Pai-Ling consider?

What should Pai-Ling think about when considering the relationship between the sales forecast and expenditures?

Besides the direct costs of producing the product, Pai-Ling will have sales, general, and administrative expenses. This includes direct and indirect selling expenses, salaries, and promotional supplies. What else is included in SG&A?

What should Pai-Ling include in her startup expenses?

Answer:

1. Three (3) perspectives should Pai-Ling consider are:

a. Potential Demand of Food and Coffee to her target market  may cause danger of productivity.

b. Expenses of building Food Service Robot Device.

c. Funds to back up her limited capital in financing her Delivery Robot , maintenance and expansion.

2. Pai-Ling should think when considering Sales Forecast and Expenditures is:

• How to attain Sales Forecast with limited allotted Expenditures.

3. Other things included in SG&A are  service, lease and supplies.

4. Pai-Ling should include in her start-up expenses are the following:

1. Cost of building Program for delivery Robot Device.
2. Materials creating functional robot.
3. Expenses in testing the delivery robot device.
4. Long-run operation of the business.

Step-by-step explanation

Explanations:

1. Three (3) perspectives should Pai-Ling consider are:

a. Potential Demand of Food and Coffee to her target market may cause danger of productivity.

• The productivity of the Robot Device will be affected especially when almost of the students rely on the delivery service through the device is overheat with the main delivery schedule or even conflict of time between customers, distance of customers from the store. 

b. Expenses of building Food Service Robot Device.

• Choosing high quality Robotic materials affect the quality of the services offered by the Delivery Robot Device, the more high quality the products is, the less expenses is.

c. Funds to back up her limited capital in financing her Delivery Robot , maintenance and expansion.

• Since Pai-Ling knew already that she have limited capital before they can launch the Delivery Robot Device, she should seek loan program with low interest. It's normal to  a business to apply/avail loan program  but be wise to  choose loan program that she think she can pay in low interest.

2. Pai-Ling should think when considering Sales Forecast and Expenditures is:

1. How to attain Sales Forecast with limited allotted Expenditures.        

• Pai-Ling should also manage and use limited allotted Expenditures without compromising the Sales Forecast like use cheap yet high/good quality of Materials in setting up Delivery Robot Device as model so when the Device is successfully made and launch that the time she can gain investors to help in making more Delivery Robotic Devices.

3. Other things included in SG&A are  service, lease supplies and Insurance.

• Service is delivery cost of the Robot Device.
•  Lease is part in expenses like renting a tools in making Robots (welding machine).
• Supplies that used by the Robot in Delivery and admin, supplies as well.
• Insurance is needed and normal to a company especially it engage in technology, it means to insure that the company is protected from risk (intellectual and physical property) from damages, theft, legal case, bankruptcy, employees and customer's safety.

4. Pai-Ling should include in her start-up expenses are the following:

1. Cost of building Program for delivery Robot Device.

Expenses to program a Delivery Robot Device ( Programing software)

2. Materials creating functional robot.

•  Tools, Machine  and Electronic parts in creating a functional  Robot .

3. Expenses in Testing the Delivery Robot Device.

• Maintenance and monitoring of the performance of the Delivery Robot Device. (like cost of the hard drive installed in the robot)

4. Long-Run Operation of the business.

• Maintenance and Replacement of new Robot Device should be estimated and what percentage it affect the income and customers satisfaction.