Product Price Promotion Distribution

AM/FM Radio watch Mass media Chain stores

Product E type calculator watch
Product D type with
temperature, pressure &
humidity sensors
Product type A made of high
strength plastic

Question 02
Year 1983 Product B Product C Product D Product Q
Units 5,700.00 1,600.00 10,000.00
Unit Price 26.00 28.00 40.00
Revenue 148,200.00 44,800.00 400,000.00 -

Unit Cost
Variable Production Costs - - - -
Production Contribution 148,200.00 44,800.00 400,000.00 -
Variable Non-Production Costs
Product Contribution
Product
TOTAL
R

-
-
Year 1983 Product B Product C Product D Product Q Product R TOTAL
Units 1,617.00 1,668.00 10,575.00 3,000.00 4,140.00 21,000.00
Unit Price 26.00 28.00 40.00 80.00 25.00
Revenue 42,042.00 46,704.00 423,000.00 240,000.00 103,500.00 855,246.00

Unit Cost 17.00 18.00 20.00 28.00 13.00

Variable Production Costs 27,489.00 30,024.00 211,500.00 84,000.00 53,820.00 406,833.00
Production Contribution 14,553.00 16,680.00 211,500.00 156,000.00 49,680.00 448,413.00

Unit Cost 1.70 1.80 2.00 1.16 0.61

Variable Non-Production 2,748.90 3,002.40 21,150.00 3,480.00 2,525.40 32,906.70
Costs
Product Contribution 11,804.10 13,677.60 190,350.00 152,520.00 47,154.60 415,506.30

Stock Holding Costs 824.67 900.72 6,345.00 2,520.00 1,614.60 12,204.99

CONTRIBUTION 10,979.43 12,776.88 184,005.00 150,000.00 45,540.00 403,301.31

Demand:
Expected Values 5,700.00 1,600.00 10,000.00 2,400.00 4,000.00
Standard Deviation 200.00 68.00 575.00 600.00 140.00
Minimum 5,500.00 1,532.00 9,425.00 1,800.00 3,860.00
Maximum 5,900.00 1,668.00 10,575.00 3,000.00 4,140.00

Q demand:
Price 80.00 50.00 45.00
Expected Values 2,400.00 6,000.00 7,900.00
Standard Deviation 600.00 1,400.00 2,050.00

R demand:
Price 20.00 22.00 25.00
Expected Values 5,500.00 5,200.00 4,000.00
Standard Deviation 200.00 190.00 140.00
Limit Q R
21,000.00 index
1.00 index
3.00
1.00 1.00 Min
3.00 3.00 Max

Product B Product C Product D Product Q Product R Results

1.00 1.00 01 5,757.00 1,668.00 10,575.00 3,000.00 - 385,871.91
1.00 2.00 02 367.00 1,668.00 10,575.00 3,000.00 5,390.00 392,393.81
1.00 3.00 03 1,617.00 1,668.00 10,575.00 3,000.00 4,140.00 403,301.31
2.00 1.00 04 1,357.00 1,668.00 10,575.00 7,400.00 - 353,995.91
2.00 2.00 05 - - 10,575.00 7,400.00 3,025.00 356,205.00
2.00 3.00 06 - - 10,575.00 7,400.00 3,025.00 365,280.00
3.00 1.00 07 - 475.00 10,575.00 9,950.00 (0.00) 336,893.50
3.00 2.00 08 - - 10,575.00 9,950.00 475.00 337,055.00
3.00 3.00 09 - - 10,575.00 9,950.00 475.00 338,480.00
ROXOR INTERNATIONAL
EXPECTED SEGMENTAL CONTRIBUTIONS ( DISTRICT 1 )
YEAR 1983

PRODUCT D PRODUCT Q PRODUCT R TOTAL

Units 10,000 6,000 4,000 20,000
Unit Price 40.00 50.00 25.00
Sales 400,000.00 300,000.00 100,000.00 800,000

Less : Variable Cost

Unit Cost 20.00 30.00 14.00
Cost of Sales 200,000.00 180,000.00 56,000.00 436,000
Non Product Related Cost
Transport 40,000.00 24,000.00 16,000.00
Paperworks 9,000.00 5,400.00 3,600.00
Sales Commissions (4% of Revenue ) 16,000.00 12,000.00 4,000.00
Total Variable Costs 265,000.00 221,400.00 79,600.00 566,000

Contribution Margin 135,000.00 78,600.00 20,400.00 234,000

Less: Fixed Costs

Mail Box Advertising 4,000.00 28,000.00 2,000.00 34,000

Journal Advertising 2,000.00 8,000.00 1,000.00 11,000
Point of Sale Promotions 10,000.00 40,000.00 10,000.00 60,000
District 1Fixed Costs 15,000.00 9,000.00 6,000.00 30,000
Specific Investment Segment Charges 90,000.00 54,000.00 36,000.00 180,000
Total Fixed Costs 121,000.00 139,000.00 55,000.00 315,000

Expected Segmental Contributions 14,000.00 (60,400.00) (34,600.00) (81,000)

Sales Commissions (4% of Revenue ) is based on Sales

Transport Cost of 80,000 is allocated based on Units
Paperworks Cost of 18,000 is allocated based on Units
1. Whether or not to adapt the B series?

We believe that the B Series should be adopted to tide us over the next two years for the following reasons:

-The presence of intense competitive pressures made apparent by the loss of 11 large orders to existing competit
market.

-Dataquest projections reveal that the market will grow by 21% for the next five years, whereas ePrecision growth
growth rate for the next five years, this will translate to less than 9% growth in the next five years.

-The market is clamoring for DMMs with continuity indicators, which the competition already has and only one pro

2. If yes, at what price level?

-In the next worksheet, we prepared three scenarios:

1. Scenario 01 where we add the Audible Continuity Indicator (ACI) to Models 1010 & 1020 and we hold prices th
contribution of $840K.

2. Scenario 02 where we add the (ACI) to Models 1010 & 1020 and we implement a $5.00 price increase. The re
$608K.

3. Scenario 03 where we add the (ACI) to Models 1010 & 1020 and we implement a $10.00 price increase. The re
($266K).

We recommend to add the ACI to Models 1010 & 1020 and implement a $5.00 price increase despite running the
s for the following reasons:

large orders to existing competitors and the entrance of 16 new serious rivals in the

years, whereas ePrecision growth for the year is only 1.7%. Assuming a constant
he next five years.

ion already has and only one product line of ePrecision possesses.

010 & 1020 and we hold prices the same. The result is an increase in incremental

nt a $5.00 price increase. The result is an increase in incremental contribution of

nt a $10.00 price increase. The result is an decrease in incremental contribution of

price increase despite running the risk of decreased sales volume. (Scenario 02)
 Scenario 01: No price increase Scenario 02: $5.00 price increa
Model 1020 1010 1030 Total Model 1020
Unit price (DMM) 179.00 139.00 219.00 Unit price (DMM) 184.00
Series B volume 66,000.00 40,000.00 36,000.00 142,000.00 Series B volume 65,160.00
Change in volume 4,200.00 4,500.00 500.00 9,200.00 Change in volume 3,360.00
Change in sales 751,800.00 625,500.00 109,500.00 1,486,800.00 Change in sales 618,240.00

Unit cost (ACI) 5.00 5.00 - Unit cost (ACI) 5.00

Total cost (ACI) 330,000.00 200,000.00 - 530,000.00 Total cost (ACI) 325,800.00

Contribution 01 421,800.00 425,500.00 109,500.00 956,800.00 Contribution 01 292,440.00

NRE 116,750.00 NRE

Contribution 02 840,050.00 Contribution 02

Scenario 03: $10.00 price increase

Model 1020 1010 1030 Total
Unit price (DMM) 189.00 149.00 219.00
Series B volume 62,472.00 36,220.00 36,000.00 134,692.00
Change in volume 672.00 720.00 500.00 1,892.00
Change in sales 127,008.00 107,280.00 109,500.00 343,788.00

Unit cost (ACI) 5.00 5.00 -

Total cost (ACI) 312,360.00 181,100.00 - 493,460.00

Contribution 01 (185,352.00) (73,820.00) 109,500.00 (149,672.00)

NRE 116,750.00

Contribution 02 (266,422.00)
Scenario 02: $5.00 price increase
1010 1030 Total
144.00 219.00
39,100.00 36,000.00 140,260.00
3,600.00 500.00 7,460.00
518,400.00 109,500.00 1,246,140.00

5.00 -
195,500.00 - 521,300.00

322,900.00 109,500.00 724,840.00

116,750.00

608,090.00