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Case 2 - contribution of no more than 2.8 million ounces in...

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Darren Nussel 1/29/08 MAR 4824 Case 2 1) Since both customers and noncustomers were unanimously in favor of the aerosol can, I wouldn’t say there is a need to take the concept further. However, I might push the design of the can further. For example, to add another selling advantage they could ripple the packaging for a better grip of the container while in the shower. 2) For both the 10 oz and 5.5 oz cans, the contribution margin is 93% and 82% for the 5.5 oz tube of gel. The actual contribution for the 10oz can is $3.96. The actual contributions for the 5.5 oz can $3.26 and for the 5.5 oz tube of gel it is $3.23. The price per ounce is $0.03 for a 10oz. can $0.04 for a 5.5 oz can and $0.13 for a 5.5 oz tube. So in conclusion, the overall it is more cost efficient to supply the 10 oz aerosol cans over the other choices. 3) Based on the four forecasts the research team created, would incur an incremental
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Unformatted text preview: contribution of no more than 2.8 million ounces in each case for the manufacturing of the 5 ½ ounce aerosol container and the 10 ounce aerosol container in addition to the continued production of the 5 ½ ounce tube package. 4) With the negotiated 20,000 unit min. order for each package size they it will cost them around 6k to do the test market. The total cost is 40k and with $1.70 profit with ea can x 20,000k cans =34k profit => 6k sunk cost. However, the pro of testing the market will give the company further insight into how the consumer market will react giving them the best way to maximize profits. 5) I think the current products life cycle has matured and they are in need of a new image/ product in order to continue to grow....
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