Fancy Fleece developed a new outdoor wear fleece fabric that is both wind and water

resistant, but retains a soft and fuzzy feel. The research and development process was more

expensive than Fancy's managers anticipated, and the materials in the fabric are also more

expensive than anticipated. The managers believe that if Fancy prices the fleece to cover total

costs, no one will buy it. The marketing department held several focus groups with

manufacturers who produce and sell winter jackets and pants to determine an appropriate

price. The marketing department also surveyed customers who recently purchased fleece

jackets to determine the amount of premium they would be willing to pay for a jacket that is

both wind and water resistant. The marketing department concluded that the new fleece fabric

would sell at a price that covers variable costs, but does not cover the total costs of production

and development. You have been asked to help the managers decide whether to produce the

fleece and how to price it if they do produce it.

What sort of analysis would you perform for this decision?