Question
Pricing Analysis Acmes Marketing team has established an MSRP for each gadget based on the feedback of consumers and tech journalists that were selected to
Pricing Analysis
Acmes Marketing team has established an MSRP for each gadget based on the feedback of consumers and tech journalists that were selected to review the prototype gadgets. The MSRP has been set as $449, $499, and $425 for Gadgets A, B, and C respectively. Acmes sales team wishes to establish a net price (to retailers) that will allow retailers a series of markdowns for the gadget, first by 15% during regular sale periods (to occur up to 3 times a year), with room for a second discount of 10% during special sale periods (Black Friday and Boxing Day), while still allowing the retailer a mark-up of at least 20% over the net price. Find the maximum net price for each gadget and determine how this net price impacts the breakeven analysis below.
Financing Analysis
In order to launch the new gadget line, Acme is securing investor financing to cover the first year of fixed costs from private investors. A first private investor is willing to loan Acme the funds needed to cover the fixed costs associated with producing the chosen gadget to be paid back over 12 equal payments, with a fixed cost of borrowing of $1,350,000; that is, the lender will charge a fixed dollar amount of $1,350,000 for the loan regardless of the principal borrowed. A second investor is willing to loan the money under a simple interest payment plan of 2.5% interest but requires the loan to be repaid in 6 months. Given that Acme will have to borrow Y dollars, provide Acme with a detailed comparison of the financing options, and determine how each impacts the breakeven analysis below.
Breakeven analyze
The following Cost and Sales projections were captured by the Acmes production and Sales/Marketing teams.
Table : Projected costs
| Gadget | Factory Set-up ($/year) | Utilities ($/year) | Property Taxes ($/year) | Salary - Engineers $/FTE | Salary Hardware technician $/FTE | Salary Software technician $/FTE | Financing costs ($/year) |
| A | 10,000,000 | 50,000 | 25,000 | 185,000 | 150,000 | 120,000 | TBD |
| B | 7,500,000 | 50,000 | 25,000 | 185,000 | 150,000 | 120,000 | TBD |
| C | 12,500,000 | 50,000 | 25,000 | 185,000 | 150,000 | 120,000 | TBD |
Table: Projected sales
| Gadget | Production Capacity (Units/year) | Target Sales at 50% production Capacity (Units/year) | Target Sales at 75% production Capacity (Units/year) | Target Sales at 100% production Capacity (Units/year) | MSRP | Net Price |
| A | 250,000 | 125 000 | 187,500 | 250,000 | 449 | TBD |
| B | 150,000 | 75,000 | 112,500 | 150,000 | 499 | TBD |
| C | 1,000,000 | 500,000 | 750,000 | 1,000,000 | 425 | TBD |
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