Sales/Year Pops 12 pack (355ml/12 Cans) 100,000,000 Cases Pops 2 Liter 200,000,000 Bottles Raw Material Costs POPS TOP - SECRET FORMULA Ingredient % in Formula Cost Per Liter of Ingredient* Carbonated Water 73.0% $0.08 High Fructose Corn Syrup 11.2% $0.49 Sugar 6.3% $0.37 Carmel Color 3.0% $1.40 Phosphoric Acid 2.7% $0.10 Caffeine 2.1% $0.12 Citric Acid 1.1% $0.15 Cola Flavor 0.6% $4.11 *Costs are delivered prices to the Plant Based on a conversation with the engineering staff the 355-ml cans need to be filled at 357 ml to avoid under-pack, while 2 Liter bottles need to be filled at 2.008 Liters per bottle. In addition to overfill, the manufacturing engineers expect to incur a 3% loss of raw materials during the making phase of production. Packing Material Costs 355 ml Can $ 25/1000 Cans 355 ml Lid/with opener $ 7/1000 Lids 12 Pack Carton $ 170/1000 Cartons 2 Liter Bottle $ 120/1000 Bottles 2 Liter Injected Molded Lid $ 25/1000 Lids Manufacturing Engineers estimate that approximately 2% of all packing materials will be damaged/lost through production and warehousing. In addition to these costs, Pops will additionally need to purchase several new molds for 2-Liter Bottles and Lids at a total cost of $2,000,000. (Amortized Straight line over 3 Years.) The Company considers these expenses a part of Packing Materials and charges all bottle mold amortization to only the 2-Liter Bottles. Manufacturing Expense Pops fruit-flavored soda volume has maximized the capacity in the current production facilities. Pops, Inc. has decided to avoid the hassle associated with building a new plant and utilize a contract manufacturer to produce Pops Cola. After investigating several contract manufacturers, the purchasing department selected Shull Enterprises based on their ability to meet rigorous quality measures at a competitive price. Shull Enterprises will require a $1.5 Million Supplier Advance for new equipment (Pops, Inc. expects the equipment to last three years and recommends using straight-line amortization for all Supplier Advances.) In addition to these costs Shull will charge the following fees. (Note that both products will be charged a fee for the making and packing process.) Making Fee - $ .035/Liter Processing (Making Fee is applicable for both Can& 2 Liter Processing) Packing Fee - $ .015/Can Bottling; $ .040/2 Liter Bottling Distribution Pops, Inc. has decided not to invest in the extensive sales/distribution system of its competitors. Instead Pops, Inc. will deliver its products in full truckloads directly to its customers distribution warehouses. Distribution costs should be allocated based on space utilization. The warehouse supervisor has pulled together the following assumptions: 80 of the 12 Pack Containers fit on a single Pallet 250 of the 2 Liter Bottles fit on a single Pallet 48 Pallets of either size fit on a normal truck The Distribution Coordinator estimates that the average cost for a trucking company to deliver a full truckload is $1,000/Truckload. Additionally, a one-time cost of $10 pallet will be charged for Storage and Handling at the warehouse. Other Fixed Costs Several departments will require additional resources on a long-term basis to appropriately staff the additional requirements of the new brand. Incremental Wages and benefits for incremental Purchasing/Planning Personnel amount to $300,000/Year. Additional non-manufacturing costs are expected to increase as follows: Research and Development $ .5 Million/Year General Administrative $ 1 Million/Year Advertising and Promotional Spending $ 6 Million / Year Allocation Basis Unless otherwise indicated Pops Incorporated allocates all fixed costs based on sales projections (in Liters). REQUIREMENTS 1. Calculate the Full Product Unit Cost of both the 12 pack and 2-Liter products. Make certain to round to four decimal places and include a detailed analysis by component (Raw Materials, Packing Materials, etc.) 2. At what price would Pops Inc. need to sell the 12 pack and 2-Liter products to the trade in order to provide a 25% profit mark-up for Pops, Inc. shareholders (Pre-Tax & Interest Expense)? 3. At what Price would the trade sell the 2 Liter and 12-pack on-shelf to the final consumer assuming that on average the trade requires a 30% mark-up?