Vanish Gel Profitability Improvement (30 mins.) Vanish Gel is part of the Vanish range of stain removers. It is a "pre-wash" stain remover (i.e. applied to the stain before the item is washed) Vanish Gel is sold in a 5 ounce tube with a built in brush. . The product is selling well with annual sales (net revenue) of 1.2 million; however, the profitability is well below the brand average. You have been asked to figure out how to get gross margin (profit) close to, or better than the brand average of 65%. Here is the current profit and loss statement for one tube of Vanish Gel Retail Selling Price $1.99 Net Revenue $1.02 Cost of Goods Gross Margin Gross Margin % 53% Note: 1) Net revenue is the price we get from our customers. 2) Cost of goods is the total manufacturing and delivery cost to our customers. 3) Gross margin is net revenue less cost of goods. 4) Gross margin % is gross margin expressed as a percentage of net revenue. $0.48 $0.54 Vanish You have several pieces of information available: a) The built in brush costs 15c per tube. A possible alternative is a ridged disc that costs 2c per tube. b) Increasing the tube size to 6.5 ounce (with a brush) will increase costs by 2c per tube. c) A store check reveals that no typical stain remover currently retais above $1.99. Questions to Address 1) What options are available to you to achieve the target gross margin %? 2) What are the possible benefits and disadvantages of each option? 3) What other information would you like to have before making a recommendation? 4) If you were not able to get any additional information and had to use your judgement to make a recommendation, what would your recommendation be and why? Vanish Gel Profitability Improvement (30 mins.) Vanish Gel is part of the Vanish range of stain removers. It is a "pre-wash" stain remover (i.e. applied to the stain before the item is washed) Vanish Gel is sold in a 5 ounce tube with a built in brush. . The product is selling well with annual sales (net revenue) of 1.2 million; however, the profitability is well below the brand average. You have been asked to figure out how to get gross margin (profit) close to, or better than the brand average of 65%. Here is the current profit and loss statement for one tube of Vanish Gel Retail Selling Price $1.99 Net Revenue $1.02 Cost of Goods Gross Margin Gross Margin % 53% Note: 1) Net revenue is the price we get from our customers. 2) Cost of goods is the total manufacturing and delivery cost to our customers. 3) Gross margin is net revenue less cost of goods. 4) Gross margin % is gross margin expressed as a percentage of net revenue. $0.48 $0.54 Vanish You have several pieces of information available: a) The built in brush costs 15c per tube. A possible alternative is a ridged disc that costs 2c per tube. b) Increasing the tube size to 6.5 ounce (with a brush) will increase costs by 2c per tube. c) A store check reveals that no typical stain remover currently retais above $1.99. Questions to Address 1) What options are available to you to achieve the target gross margin %? 2) What are the possible benefits and disadvantages of each option? 3) What other information would you like to have before making a recommendation? 4) If you were not able to get any additional information and had to use your judgement to make a recommendation, what would your recommendation be and why