EcoClean Financial Viability and Business Performance Case Study

Vocabulary flashcards reviewing financial viability concepts, calculations, SWOT analysis, and assessment criteria for the EcoClean business case study.

EcoClean Pūtake

To support busy, time-poor families who want their houses cleaned using eco-friendly and non-toxic products.

EcoClean Break-Even Formula

$$\text{Break-even Point} = \frac{\text{Fixed costs}}{\text{Selling price} - \text{variable cost}}$$

EcoClean Break-Even Point

$$23\,\text{cleaning hours per week}$$

EcoClean Weekly Operating Margin Above Break-Even

$57\,\text{cleaning hours per week}$ ($80\,\text{current hours} - 23\,\text{break-even hours}$).

EcoClean SWOT Strengths

Use of eco-friendly and non-toxic products, competitive pricing, and strong customer loyalty due to high-quality service.

EcoClean SWOT Weaknesses

Higher cost of eco-friendly products from specialised supplier, limited brand recognition, and dependency on local customer base.

EcoClean SWOT Opportunities

Expand services to include commercial cleaning, offer discounts for regular clients, and increase marketing efforts to attract more customers.

EcoClean SWOT Threats

New competitors entering the market, economic downturn affecting customers' ability to afford cleaning services, and changes in regulations regarding eco-cleaning products.

EcoClean Income Statement Summary (2024–2025)

Total income of $\$166,400$, total expenses of $\$47,840$, and a reported profit of $\$118,560$.

Kaia and James' Initial Capital Investment

$\$20,000$ invested by each owner ($\$40,000$ total) to purchase eco-friendly cleaning supplies, set up a website, and cover initial marketing costs.

EcoClean Weekly Revenue Calculation

$$80\,\text{hours} \times \$40 = \$3,200\,\text{revenue per week}$$

EcoClean Owner Drawings

$\$900$ per week each for Kaia and James as fixed cost payments for their time and skills, which are excluded from the Income Statement.

Supplier Closure Chain of Consequences (Excellence Level)

Supplier closes $\rightarrow$ replacement products potentially cost more $\rightarrow$ expenses rise $\rightarrow$ profit falls $\rightarrow$ break-even position worsens $\rightarrow$ financial viability decreases.

New Supplier Cost Impact Chain (Merit Level)

New supplier $\rightarrow$ higher cleaning-supply costs $\rightarrow$ higher total expenses $\rightarrow$ lower profit $\rightarrow$ reduced financial viability.

Assessment Distinction: Achieved vs. Merit vs. Excellence

Achieved tells us what happens. Merit explains how and why it matters. Excellence weighs up how significant it is and reaches a justified conclusion.

Impact of a 25% Increase in Supply Costs

Weekly supply expenses rise from $\$400$ to $\$500$ (an additional $\$5,200$ per year), increasing annual supply expenses to $\$26,000$ and reducing reported profit from $\$118,560$ to $\$113,360$.

Positive Consequence of Securing a Replacement Supplier

Allows EcoClean to maintain its $80\,\text{cleaning hours}$ per week, generating $\$3,200$ in weekly revenue, operating $57\,\text{hours}$ above break-even, protecting customer loyalty, and upholding its pūtake.

Negative Consequence of Securing a Replacement Supplier

Higher cleaning-supply prices increase total expenses and reduce profit; passing costs on to clients risks losing price-sensitive customers during an economic downturn.