ServerVault Case Study Example | Topics and Well Written Essays - 250 words

ServerVault - Case Study Example The contribution margin shall be the total revenue minus the overhead costs per unit. The overhead costs are $50,000. The break even point is thus the total overhead costs divided by the contribution margin. This equals $(50,000/1.300=38). The break even point is thus 38 servers. This number is important given that it determines the number of units that should be sold to earn a profit. In this case, it is 39 units or more. The key drivers behind cash generation on consumption for ServerVault are the security features it offers and it reliability. While the security feature is seven-layered and has thus met the U.S. Department of Defense security standards, the reliability feature results from its use of multiple internet access points. The revenue from the facility is $1,300 as a result of the two drivers. The cash consumption from the premises and the facilities installed is due to the fact that ServerVault has not reached its breakeven point. Beyond this point, the business would be profitable. With the total number of the servers (Dec-02) at 14,137,000 from a mere 3 in January of 2000, the business is promising. The cash position keeps improving too. From a difference of less than $20,000 in January 2000, the cash position improved to a difference of more than $1.5m in May of the same year. To this end, ServerVault should concentrate on reducing debt while increasing its returns to hit the breakeven point soon enough. This will win the confidence of investors and thus allow for injection of more capital for its