Ch8Spreadsheets

Ch8Spreadsheets - Target ROI Feasibility Analysis The...

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Unformatted text preview: Target ROI Feasibility Analysis The reason why we spent some time learning to understand the difference between variable and fixed costs will now become very clear to you as we take all of the fixed and variable costs involved in the launch of an innovation, a ne Fixed Costs Manufacturing fixed costs Manufacturing (tools, facilities rental) $8,000 R&D (including market research) $10,000 Patent $10,000 Other $10,000 Total fixed manufacturing costs $38,000 Marketing Program Fixed Costs Advertising Campaign $10,000 Sales Expense (including sales training) 5,000 Distribution 6,000 Other 0 Total fixed marketing costs $21,000 Administrative overheads 12,000 Other fixed costs and assets employed 0 Target profit in dollars (an alternative to using ROI in cell F24) 0 Total fixed costs and assets employed and target dollar profit $71,000 Target Return on total fixed costs and assets assets employed 20.0% Average Selling Price (after discounts, rebates, coupons and allowances) $0.90 Variable Costs Estimated average variable manufacturing cost per unit sold $0.40 Estimated average variable distribution cost per unit $0.10 Estimated variable sales cost per unit $0.10 Estimated average after-sales service cost per unit sold $0.00 Estimated average variable marketing cost per unit $0.00 Contribution margin per unit $0.30 Size of target market (in annual units sold) 2,000,000 Size of target market reached by your distribution (in annual unit sales) 1,000,000 Target Volume 284,000 Target share of annual sales 14.2% Target share of reached market annual sales 28.4% Target share of reached market if sales are spread over two years 14.2% product, the Eco-spout (see the flyer right). Before using the spreadsheet go to line 60 for a primer on break-even. Steps: Step 1: Estimate size of target market (cell F36), and reached target market (F37). w ew Fine-tune Price...
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Ch8Spreadsheets - Target ROI Feasibility Analysis The...

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