13. Calculating CMI Price Test 1 Test 2 Conventional Pads CMI Pads Conventional Pads CMI Pads Number of pads per set 24 6 12 5 Number of set required 20 1 50 1 Cost per set 150 500 120 1200 Total 3,000 3,000 6000 6000
14. Calculating CMI Cost Corporate management expected a contribution margin after all manufacturing costs of 40% to 50% of selling price. Without new equipment Price per 11 1/2 inches pad $444 Average Potential demand for CMI pads monthly 3,413 Total cost monthly $1,516,720 Selling Price Low-end price High-end price $500 $1,200 Net sale $1,706,250 $4,095,000 Gross profit $189,530 $2,578,280 Contribution Margin 11% 63% With equipment cost $750000 Price per 11 1/2 inches pad $208 Depreciation $5 Cost per pad $213 Average Potential demand for CMI pads monthly 3,413 Total cost monthly $725,293 Selling price Low-end price High-end price $500 $1,200 Net sale $1,706,250 $4,095,000 Gross profit $980,957 $3,369,707 Contribution Margin 57% 82%
15. Price list Size (inches) 11 ½ 14 17 ½ 19 ¾ 23 30 Total manufacturing cost $207.54 $272.16 $396.96 $493.08 $581.34 $1,061.10 Change is Cost 31% 46% 24% 18% 83% Price (according to change in cost) 850 1115 1626 2019 2381 4346
The Manufacturers' Representatives should be trained by a small CMI sales team on how to market the cushion pads. The focus of the training should be the cost savings benefit of the curled metal pads, the potential dangers of the asbestos pads, and the CMI brand and product name. The pads currently in use are generic and not marketed or branded. Establishing a product name is important in promoting the diffusion of the product in the marketplace.
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