Decisions for Quarter One and Quarterly Business Review

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Content

TO:

General Manager FROM:

Stall Brick (Manufacturing Manager)

Production Report – Facility Base Costs

Facility Base Costs have been increasing about 6% per quarter in 2019/2020, as shown below:

The graph shows facility base costs by quarter, from Q1 2019 through Q4 2020. The facility cost per quarter over that period of time, starting in Q1 2019, were $58,242, $64,650, $67,691, $70,775, $70,951, $75,015, $75,841, and $79,953.

Facility expenses are expected to increase 2 to 5% per quarter through 2021. A major contributor to that expense is our building rent. The lease includes utilities and is pegged to inflation and is also dependent on the number of inspection lines and number of readers produced. In order to accurately estimate the utility costs, plan on $30-$40 of utility costs per production unit. The present facility will accommodate 25 inspection lines. To expand beyond 25 lines will require a one-time expansion cost of $50,000 to build the new facility and obtain the necessary permits.

Expansions beyond 50 lines will necessitate very careful long term planning. Our Environmental Engineer indicates that the total air emissions from the plant will reach a point at which the manufacturing facility will be classified as a major air emission source and will require a Prevention of Significant Deterioration air permit. The

Quarter

D o

ll a r

$52,417

$61,300

$70,183

$79,066

$87,949

Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20

$58,242

$64,650

$67,691

$70,775 $70,951

$75,015 $75,841

$79,953

Facility Base Costs

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facility will also have to be disconnected from the municipal wastewater treatment system and will have to treat and discharge its effluent directly into the Ramsey River. If we expand to 51 or greater lines, it will take one year to obtain the required permits and a one-time expenditure of $250,000.

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