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2. Define a unit of sale

3. Establish a unit price (based on competition)

4. Variable costs

a. Labor

i. (if manufacturing use cost per unit to produce, not per hour)-use hourly rate to arrive at unit cost

ii. If service, use hourly rate based on # of hours to perform service

b. Materials (cost to produce)

c. Travel (primarily used for service business)

d. Supplies

e. Other

5. Fixed costs

a. Rent

b. Owner salary (full time vs part-time venture)

c. Owner taxes (20%*Owner salary)

d. Advertising

e. Equip lease

f. Miscellaneous

g. ????????

6. Profit Component (full time vs part-time venture)

7. Review Income Statement for accuracy

8. Review unit sales for reasonableness

9. Change data to arrive at realistic most likely scenario