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    Metabical Working

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    Arun Patil
    The document compares three options for a new product across retail price, manufacturer price, variable costs, and unit contribution margin. It then provides three forecasting methods to project unit sales and gross margins over five years based on the different product options and prices. Fixed costs are also presented for R&D, marketing, and manufacturing over the time period. Finally, the return on investment is calculated for each product/price/forecast combination by comparing the cumulative 5-year gross margin to cumulative fixed costs.

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    Metabical Working

    Uploaded by

    Arun Patil
    65 views6 pages
    The document compares three options for a new product across retail price, manufacturer price, variable costs, and unit contribution margin. It then provides three forecasting methods to project unit sales and gross margins over five years based on the different product options and prices. Fixed costs are also presented for R&D, marketing, and manufacturing over the time period. Finally, the return on investment is calculated for each product/price/forecast combination by comparing the cumulative 5-year gross margin to cumulative fixed costs.

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    Metabical

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    The document compares three options for a new product across retail price, manufacturer price, variable costs, and unit contribution margin. It then provides three forecasting methods to project unit sales and gross margins over five years based on the different product options and prices. Fixed costs are also presented for R&D, marketing, and manufacturing over the time period. Finally, the return on investment is calculated for each product/price/forecast combination by comparing the cumulative 5-year gross margin to cumulative fixed costs.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    65 views6 pages

    Metabical Working

    Uploaded by

    Arun Patil
    The document compares three options for a new product across retail price, manufacturer price, variable costs, and unit contribution margin. It then provides three forecasting methods to project unit sales and gross margins over five years based on the different product options and prices. Fixed costs are also presented for R&D, marketing, and manufacturing over the time period. Finally, the return on investment is calculated for each product/price/forecast combination by comparing the cumulative 5-year gross margin to cumulative fixed costs.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 6

    Exhibit 3

    Option 1 Option 2 Option 3


    Retail price $ 75.00 $ 125.00 $ 150.00
    Retail gross margin $ 25.00 $ 41.67 $ 50.00
    Manufacturer price $ 50.00 $ 83.33 $ 100.00
    Variable cost $ 25.20 $ 25.20 $ 25.20
    Unit Contribution $ 24.80 $ 58.13 $ 74.80
    50% 70% 75%
    Method 1: Year 1 Year 2 Year 3 Year 4 Year 5
    Number of Americans with BMI between 25 and 30 78,200,000 78,200,000 78,200,000 78,200,000 78,200,000 3750 6750
    x 35% actively trying to lose weight 27,370,000 27,370,000 27,370,000 27,370,000 27,370,000 2250 4050
    x 15% who are comfortable using diet pills 4,105,500 4,105,500 4,105,500 4,105,500 4,105,500 450 810

    10% who might purchase Metabocil in Year 1


    adding 5% each subsequent year 410,550 615,825 821,100 1,026,375 1,231,650 unit sales 6450 11610
    plus 60% buy a second package 246,330 369,495 492,660 615,825 738,990 unit sales
    plus 20% of these buy a third package 49,266 73,899 98,532 123,165 147,798 unit sales

    Sales 706,146 1,059,219 1,412,292 1,765,365 2,118,438 unit sales

    Method 2:
    Number of Americans with BMI between 25 and 30 78,200,000 78,200,000 78,200,000 78,200,000 78,200,000
    x 12% say they will go to a doctor to request prescription 9,384,000 9,384,000 9,384,000 9,384,000 9,384,000
    10% who might purchase Metabocil in Year 1
    adding 5% each subsequent year 938,400 1,407,600 1,876,800 2,346,000 2,815,200 unit sales
    plus 60% buy a second package 563,040 844,560 1,126,080 1,407,600 1,689,120 unit sales
    plus 20% of these buy a third package 112,608 168,912 225,216 281,520 337,824 unit sales
    Sales 1,614,048 2,421,072 3,228,096 4,035,120 4,842,144 unit sales

    Method 3:

    Ideal target (overweight females, 35-65, college-educated) 4,300,000 4,300,000 4,300,000 4,300,000 4,300,000
    30% who might purchase Metabocil in Year 1
    adding 5% each subsequent year 1,290,000 1,505,000 1,720,000 1,935,000 2,150,000 unit sales
    plus 60% buy a second package 774,000 903,000 1,032,000 1,161,000 1,290,000 unit sales
    plus 20% of these buy a third package 154,800 180,600 206,400 232,200 258,000 unit sales
    Sales 2,218,800 2,588,600 2,958,400 3,328,200 3,698,000 unit sales
    Gross Margin Forecast
    manufacturer gross margin per unit * forecasted unit sales

    $75 Retail Price Year 1 Year 2 Year 3 Year 4 Year 5 Cumulative


    Using Forecast Method 1 $ 17,512,421 $ 26,268,631 $ 35,024,842 $ 43,781,052 $ 52,537,262 $ 175,124,208###
    Using Forecast Method 2 $ 40,028,390 $ 60,042,586 $ 80,056,781 $ 100,070,976 $ 120,085,171 $ 400,283,904###
    Using Forecast Method 3 $ 55,026,240 $ 64,197,280 $ 73,368,320 $ 82,539,360 $ 91,710,400 $ 366,841,600###

    $125 Retail Price Year 1 Year 2 Year 3 Year 4 Year 5 Cumulative


    Using Forecast Method 1 $ 41,048,267 $ 61,572,400 $ 82,096,534 $ 102,620,667 $ 123,144,801 $ 410,482,670###
    Using Forecast Method 2 $ 93,824,610 $ 140,736,915 $ 187,649,220 $ 234,561,526 $ 281,473,831 $ 938,246,102###
    Using Forecast Method 3 $ 128,978,844 $ 150,475,318 $ 171,971,792 $ 193,468,266 $ 214,964,740 $ 859,858,960###

    $150 Retail Price Year 1 Year 2 Year 3 Year 4 Year 5 Cumulative


    Using Forecast Method 1 $ 52,819,721 $ 79,229,581 $ 105,639,442 $ 132,049,302 $ 158,459,162 $ 528,197,208###
    Using Forecast Method 2 $ 120,730,790 $ 181,096,186 $ 241,461,581 $ 301,826,976 $ 362,192,371 $ 1,207,307,904###
    Using Forecast Method 3 $ 165,966,240 $ 193,627,280 $ 221,288,320 $ 248,949,360 $ 276,610,400 $ 1,106,441,600###

    ###
    ###
    ###
    ###
    Fixed Costs

    Sunk Costs Year 1 Year 2


    Marketing $ 23,000,000 $ 15,000,000
    Manufacturing/OH $ 1,200,000 $ 1,200,000
    R&D $ 400,000,000 $ - $ -
    $ 400,000,000 $ 24,200,000 $ 16,200,000
    Year 3 Year 4 Year 5 Cumulative
    $ 15,000,000 $ 15,000,000 $ 15,000,000 $ 83,000,000
    $ 1,200,000 $ 1,200,000 $ 1,200,000 $ 6,000,000
    $ - $ - $ - $ 400,000,000
    $ 16,200,000 $ 16,200,000 $ 16,200,000 $ 489,000,000
    ROI
    (5yr cumulative gross margin - 5yr cumulative fixed costs)/ 5yr cumulative fixed costs

    $75 Retail Price


    Using Forecast Method 1 -64%
    Using Forecast Method 2 -18%
    Using Forecast Method 3 -25%

    $125 Retail Price


    Using Forecast Method 1 -16%
    Using Forecast Method 2 92%
    Using Forecast Method 3 76%

    $150 Retail Price


    Using Forecast Method 1 8%
    Using Forecast Method 2 147%
    Using Forecast Method 3 126%

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