Live site: https://alsoadarsh.github.io/challenged-kitchen-cost-analysis
Challenged Kitchen Co. is launching a new product line and must choose between building in-house production or outsourcing manufacturing. The choice locks in unit economics for four years.
| Metric | In-House | Outsource |
|---|---|---|
| NPV (4-year) | $1,304,949 | $1,089,212 |
| NPV Advantage | $215,737 | — |
| Year 1 Cash Flow | $385,980 | $243,320 |
| Cost per Unit | $7 variable | $18 fixed |
| Break-Even | 3,030 units/yr | No fixed costs |
Year 1 projected demand is 14,000 units — break-even is at 3,030. The investment pays back in Year 1 under virtually any realistic demand scenario.
1,000 iterations varying Year 1 demand (mean 14,000, SD 1,000) and annual growth rate (mean 20%, SD 3%):
- In-house preferred in 100% of iterations
- In-house NPV range: $878K–$1.75M
- Outsource NPV range: $805K–$1.38M
- NPV advantage consistent at $154K–$220K across all iterations
| Parameter | Value |
|---|---|
| Selling price | $40/unit (fixed 4 years) |
| In-house variable cost | $7/unit |
| Outsource cost | $18/unit |
| Initial investment | $400,000 |
| Depreciation | $100,000/year (straight-line) |
| Year 1 demand | 14,000 units |
| Annual growth rate | 20% |
| Tax rate | 21% |
| Discount rate | 7% |
| File | Description |
|---|---|
index.html |
GitHub Pages case study site |
Challenged_Kitchen_Memo.pdf |
Full business memorandum |
Challenged_Kitchen_Model.xlsx |
Excel financial model with Monte Carlo simulation |
Adarsh Shukla MS Business Analytics · University of Dayton LinkedIn · GitHub
