Parvaderm Corporation

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1. Masters must decide whether to approve a market test of the new products to a limited cross-section of drug and food-and-drug stores. The estimated cost of the test is $30,000, along with a $10,000 supplier set-up charge. A 20,000 unit minimum order for each package size is also required. Estimated total cost of the test market is as follows: $30,000 Test Market cost

+ 10,000 Set-up cost
+ 5,800 10 oz can Production cost
+ 4,800 5 ½ oz can Production cost
$40,600 Total test Market cost

Based of Soft and Silky’s performance through 2000, results from the focus group studies and the performance of analogous products, the aerosol container concept should be produced further.

2.5 ½ Oz. Tube Pricing:
5 ½ Oz. Aerosol Pricing:
10 Oz. Aerosol Pricing:

Retail Pricing
$ 3.95 Retail Pricing
$ 3.50 Retail Pricing
$ 4.25
÷
1.4
÷
1.4
÷
1.4

Rack Jobber Pricing
$ 2.82 Rack Jobber Pricing
$ 2.50 Rack Jobber Pricing
$ 3.04
÷
1.2
÷
1.2
÷
1.2

Manufacture Pricing
$ 2.35 Manufacture Pricing
$ 2.08 Manufacture Pricing
$ 2.53
Less: Unit Variable Cost
$(0.40) Less: Unit Variable Cost
$(0.24) Less: Unit Variable Cost
$(0.29)
Per Unit Contribution
$ 1.95 Per Unit Contribution
$ 1.84 Per Unit Contribution
$ 2.24
÷
5.5 oz
÷
5.5 oz ÷
5.5 oz
Per Oz. Contribution
$ 0.35 Per Oz. Contribution
$ 0.34 Per Oz. Contribution
$ 0.22

3.Forecast A: Unit Volume
Oz.Contribution
Contribution Dollars

5.5 oz Tube 8600000
×
0.35
=
$ 3,010,000
5.5 oz. Aerosol:
Cannibalized Volume
2145174
×
0.34
=
$ 729,359
Incremental Volume
300000
×
0.34
=
$ 102,000
Total
11045174
$ 3,841,359
Less: Forecasted Volume (10745174)
×
0.35
=
$ (3,760,811)
Total
300000
$ 80,548
Forecast B: Unit Volume
Oz. Contribution
Contribution Dollars
5.5 oz Tube
8400000
×
0.35
=
$ 2,940,000
5.5 oz. Aerosol:

Cannibalized Volume
2345174
×
0.34
=
$ 797,359
Incremental Volume
500000
×
0.34
=
$ 170,000
Total
11245174
$ 3,907,359
Less: Forecasted Volume
(10745174)
×
0.35
=
$ (3,760,811)
Total
500000
$ 146,548

Forecast C: Unit Volume
Oz.Contribution
Contribution Dollars
5.5 oz Tube
9000000
×
0.35
=
$ 3,150,000
10 oz. Aerosol:

Cannibalized Volume
1745174
×
0.22
=
$ 383,938
Incremental Volume
800000
×
0.22
=
$ 176,000
Total
11545174
$ 3,709,938
Less: Forecasted Volume
(10745174)
×
0.35
=
$ (3,760,811)
Total
800000
$ (50,873)

Forecast D: Unit Volume
Oz.Contribution
Contribution Dollars
5.5 oz Tube
9600000
×
0.35
=
$ 3,360,000
10 oz. Aerosol:

Cannibalized Volume
1145174
×
0.22
=
$ 251,938
Incremental Volume
1500000
×
0.22
=
$ 330,000
Total
12245174
$ 3,941,938
Less: Forecasted Volume
(10745174)
×
0.35
=
$ (3,760,811)
Total
1500000
$ 181,127

Expected Monetary Values:Forecast A: Unit Volume
Price Per oz
Sales

5.5 oz Tube 8600000
×
0.72
=
$ 6,176,364
5.5 oz. Aerosol:
Cannibalized Volume 2145174
×
0.64
=
$ 1,365,111
Incremental Volume 300000
×
0.64
=
$ 190,909
Total
11045174
$ 7,732,383
Less: Forecasted Volume (10745174)
×
0.72
=
$ (7,716,989)
Total
300000
$ 15,395
Forecast B: Unit Volume
Price Per oz
Sales

5.5...
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