Eco Water Essay

380 Words2 Pages
Eco Water Inc. How does the PURITY II system compare with other alternatives? What are its advantages and limitations relative to customer needs? PURITY II system uses reverse osmosis purification system, which results in better tasting water. Advantages: • Most effective technology for improving drinking water • Certified by the Environmental Protection Agency to reduce levels of most foreign substance • Compact system – fits under the kitchen sink • One time installation by Eco salesperson in about a half hour • Works well with municipal system or well water • It purifies 68 litres daily • Retail price $395 includes installation • No movable parts or electrical connections, no internal parts that will corrode • Removes potentially harmful matter Limitations: • Set of filters needs to be replaced every two years ($80 cost) • Installation involves drilling a hole in the sink • Many new chemical compounds enter water supply each year How much contribution to profit comes from the sale of a PURITY II unit and/or filter? Retail Price per unit $395 Cost of goods per unit -$200 Sales Commission (50% average) per unit -$90 Telemarketing (50% average) per unit -$7 CM per unit $98 What do we know about the firm's current costs? About its profitability? Current costs: • Fixed $4500 operating cost • Manufacturer’s cost $200per unit includes delivery • $100 per sale for a salesperson who develops his or her own prospects • $80 per unit on sales leads generated by the company’s telemarketing • $4 per appointment for the students who make the telephone contacts • $10 per unit sold from an appointment. Income Statement – Eco Water Inc. Revenue (20*6*12*$395) $568,800 Variable Cost (20*6*12*$297) -$427,680 Fixed Cost ($4500*12) -$54,000 Net Income $87,120 How much does the firm need to sell to break even? Break

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