The Fragrance Ltd., a mid-size Indian FMCG company, manufactures personal care products, home care products and high-end personal & home care products. Its vision statements states that " the companys focus on quality products with sustainability orientation."

Fragrances value chain primarily involves research and development, procurements, manufacturing operations, product packaging and distribution all at its plant in Baddi, Himachal Pradesh. The finished products are distributed across North and Central India. Due to the limited plant capacity, in case of special order or surge in demand the company outsources the excess production of required toiletries products.

Historically, its product mix is dominated by personal care products (about 48%) followed by home care products (32%) and followed by high-end personal and home care products (20%) which are largely concentrated in Northern India. The company currently captures 5% of the FMCG industry in India.

The new CEO of Fragrance Ltd., Mr. Harshit, is planning to increase firms market share by 7% in next 5 years. But he is also concerned about the post-Covid consumer behavior which may be a hurdle in his expansion dreams. He therefore requests, Mr. Sarthak, the Head of marketing research at Fragrance, to conduct a post-Covid market demand analysis. Mr. Sarthak in his market research report, he found that the Indians are now more than ever concerned about their health and fitness. Based on his analysis he proposed that the company should rather than expanding through existing product lines, should enter a new-product line related to fitness and wellness products.

The proposal was well-received by the CEO Mr. Harshit, whose strategic plan was then to initially concentrate on Northern Indian which was already a market for Fragrance companys products and thereafter in two years new product line will be expanded to entire India. He asked production manager, Mr. Rohit to prepare a financial and cost analysis of the new product line for production during next financial year.

Mr. Rohit, while analyzing the production and cost requirement for the new product line, found that the existing labor available is working at full capacity, engaged in manufacturing of the existing product line of personal care products, home care products and high-end personal & home care products. With his new knowledge about labor being the limiting factor in production, he moved on to analyze the cost, revenue and earnings from existing products to analyze the impact of shortage of labor at Baddi plant, on firms expansion plan.

Suppose you are Mr. Rohit, write a cost management report for the CEO addressing the following questions:

1. Prepare a cost sheet (including the direct and indirect cost) of the fitness and wellness products. You may use illustrative numbers in the cost sheet.
2. Consider that the direct labor is a limiting factor and that the production of existing personal care products need to be decreased in order to shift production facilitates to manufacture new product line fitness and wellness products. Assume that new product will be profitable for the overall firm (i.e. the new product profit will be higher to compensate for the erosion of profit from existing products). List all the relevant costs and relevant revenues for Fragrance Ltd. to shift to fitness and wellness products.
3. Given that Fragrance Ltd.s vision statement reflects its commitment to sustainability, briefly explain the sustainability factors that should be considered while making the managerial decision making of introducing a new product line.