Case Study Gizmo
Midwest Fan, Inc.
Internal Memorandum
To: Sanday Walker
From: Yaritza Rosa
Date: March 8, 2013
Re: Improved product Offering
I have concluded an analysis of the current cost and pricing structure of the current Gizmo against the proposed cost and pricing structure provided for the new improved Gizmo. Under the current pricing and cost structure our breakeven point is 32836 unit or $2,462,686.57 in dollars, keeping the same selling price of $75.00 while increasing our contribution margin from $24.75 to $30.00, our breakeven point with the new Gizmo, is 36667 units or $2,750,000 dollars which is approximately a 112% increase. Since we are projecting that demand is relatively inelastic I would recommend an increase in sales price on the new Gizmo to $112.50 per unit based on selling the expect volume of 80,000 of the new Gizmos in order to maintain our current operating income. I would also recommend introducing an improved Gizmo, in addition to the current model. This would allow our R&D department to research alternative materials that are more in line with the cost of the current model, as well as figure out …show more content…
Redesign the current gizmo to allow for additional funtionalioty in stead of introducing compelty new gizmo. Is there opportunies to decrease cost of materials
Internal Memorandum
To: Sanday Walker
From: Yaritza Rosa
Date: March 8, 2013
Re: Improved product Offering
I have concluded an analysis of the current cost and pricing structure of the current Gizmo against the proposed cost and pricing structure provided for the new improved Gizmo. Under the current pricing and cost structure our breakeven point is 32836 unit or $2,462,686.57 in dollars, keeping the same selling price of $75.00 while increasing our contribution margin from $24.75 to $30.00, our breakeven point with the new Gizmo, is 36667 units or $2,750,000 dollars which is approximately a 112% increase. Since we are projecting that demand is relatively inelastic I would recommend an increase in sales price on the new Gizmo to $112.50 per unit based on selling the expect volume of 80,000 of the new Gizmos in order to maintain our current operating income. I would also recommend introducing an improved Gizmo, in addition to the current model. This would allow our R&D department to research alternative materials that are more in line with the cost of the current model, as well as figure out …show more content…
Redesign the current gizmo to allow for additional funtionalioty in stead of introducing compelty new gizmo. Is there opportunies to decrease cost of materials