S2 Prime Breakeven Calculation Thoughts

I. Given overhead divided by projected sales = overhead per unit

$1,000,000 2,000,000 = $.50 per unit (allocated fixed cost per unit)

Direct cost less quantity discounts

Duo-PakRefill

$2.68$2.04

-.08-.04

$2.60$2.00

Direct cost per unit plus allocated fixed cost per unit

Duo-PakRefill

$2.600$2.000

+.500+.500

$3.100Cost per unit$2.500

Calculate the even cent breakeven SRP for the Duo-Pak and the Refill.

A.10 % Brokers' commission and price to retailers*

Duo-PakRefill

$3.100Cost per unit90 %$2.500

Brokers' Commission10 %*

$3.444Price to Retailers 100 %

B.Retailers margin and breakeven SRP*

Duo-PakRefill

$3.444Price to Retailers 75 %

Retailers margin25 %*+.926

Breakeven SRP 100 %

Even cent Breakeven SRP

*markup on selling concept required

II.Statement of Problem/Opportunity

A.Primary - Undetermined pricing strategy

B.Secondary

1.Target market not established

2.Positioning strategy in question

3.Undetermined IMC plan and budget

4.Competitors' reaction to a Prime introduction not analyzed

III.Recommended Action

A.Primary - Establish an initial SRP for the Duo-Pak of $?.?? And Refill of $?.??.

B.Secondary

1.?.??

2.?.??

3.?.??

4.?.??

As you establish a SRP for the Duo-Pak and Refill, a breakeven (BE) suggested retail price (SRP) must be determined first using the given numbers (unit method is recommended).The brokers' commission and retailers' markup are given as percent of selling.

Following BE set your actual SRP considering 1) Psychological pricing concepts, 2) Captive-Product concept, 3) Premium pricing concept, 4) Competitive Analysis suggest best if Windex does not react