Sales value will be impacted by a number of factors-particularly the capital investment necessary to produce or move items. It’s important to consider the following:
Capital sunk costs for production and distribution, such as tools and machinery. These represent potential future earnings without selling them off.
The price to manufacture the product, including labor
Hard costs associated with shipping and storage that will apply if inventory is sold–or it can be saved and sold later. The benefits of these hard costs may vary because they could be offsetting money paid to rent space in a warehouse for example
Future sales projections based on industry norms. If we’re producing skis it’s likely we’ll estimate sales volume based on other companies’ trends.
