The product manager for Company XYZ (the manufacturer) was preparing a new product analysis to evaluate its profitability On the basis of extensive consumer research, he had decided to sell the product at $25 retail In this market, retailers expected a 30 margin on cost (there is no wholesaler) Brand XYZs variable costs are $12 50 per unit, and the total fixed costs are estimated to be $100,000 The forecasted sales volume for the item at this $25 retail price is 20,000 units Will the product make a profit with this planned selling price If YES, how much If NO, how much of a loss would there be b In year 2, the company plans to introduce a second product ABC in a completely different market to prevent cannibalization Product ABC has a unit contribution of $6 85 The brand manager thinks that they will be able to sell 4,500 units in the first quarter Unit sales are forecasted to increase 10 every subsequent quarter The company has invested $50,000 in R D for the product as well as $45,000 in marketing for the launch What is the Year 1 ROMI for this new product initiative

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Posted on Sep 02, 2024

The product manager for Company XYZ (the manufacturer) was preparing a new product analysis to evaluate its profitability. On the basis of extensive consumer research,

The product manager for Company XYZ (the manufacturer) was preparing a new product analysis to evaluate its profitability. On the basis of extensive consumer research, he had decided to sell the product at $25 retail. In this market, retailers expected a 30% margin on cost (there is no wholesaler). Brand XYZs variable costs are $12.50 per unit, and the total fixed costs are estimated to be $100,000. The forecasted sales volume for the item at this $25 retail price is 20,000 units.

Will the product make a profit with this planned selling price? If YES, how much? If NO, how much of a loss would there be?

b. In year 2, the company plans to introduce a second product ABC in a completely different market to prevent cannibalization. Product ABC has a unit contribution of $6.85. The brand manager thinks that they will be able to sell 4,500 units in the first quarter. Unit sales are forecasted to increase 10% every subsequent quarter. The company has invested $50,000 in R&D for the product as well as $45,000 in marketing for the launch. What is the Year #1 ROMI for this new product initiative?