MBA Case Study
– Saudi Electronics Co. (Smart Security Camera Line) Saudi Electronics Co. (SEC) manufactures and sells high-end smart home devices. The company
is launching a new Smart Security Camera (SSC) line targeting premium residential customers
in Riyadh and Jeddah.
The company has provided the following monthly cost data:
Fixed Costs (Monthly):
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Factory rent: SAR 40,000
Salaries (production & admin staff): SAR 120,000
Utilities & maintenance: SAR 15,000
Marketing & advertising: SAR 25,000
Insurance & overhead: SAR 10,000
Variable Costs (per SSC unit):
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Raw materials: SAR 400
Direct labor per unit: SAR 50
Packaging: SAR 20
Warranty and support allocation: SAR 30
Selling Price (SP): SAR 750 per unit
Section 1 – Cost Identification
1. Identify the fixed costs and variable costs in this scenario.
2. Are there any semi-variable costs? Explain why.
Section 2 – Break-Even Analysis
3.
4.
5.
6.
Calculate the contribution margin per unit (CM).
Calculate the break-even point (BEP) in units.
Calculate the break-even point (BEP) in SAR revenue.
Draw a BEP chart showing:
o Profit zone
o Loss zone
o
Break-even point
Section 3 – Profit and Revenue Analysis
7. Using the profit model:
o Calculate the profit if the company sells 1,000 units.
o Calculate the profit if sales increase by 15% above 1,000 units.
Section 4 – Sensitivity Analysis
8. If raw material costs increase by 20%, recalculate the BEP in units.
9. If marketing costs increase by 30%, recalculate the BEP in units and profit at 1,000
units.
Section 5 – Target Profit & Pricing
10. If the company wants a monthly profit of SAR 100,000, calculate the number of units
it must sell.
11. If variable costs increase by 15%, calculate the new selling price per unit required to
maintain the original BEP.
Section 6 – Managerial Decision-Making
12. Based on your calculations, discuss:
o Is it financially feasible to launch the SSC line with the current cost structure?
o Suggest strategies to reduce BEP without reducing product quality.
o Discuss potential pricing strategies in case of increased costs or market changes.