Paverderm Essay

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Recommendation: I am recommending Parvaderm Corporation move forward with plans to switch production to the Soft and Silky Shaving Gel 10 oz. aerosol can. It is also my recommendation that we for-go the $30,000 market test and move right into production for the busy season. Rationale: 1. Parvaderm Corporation is projecting a .32% decrease in sales with its current 5.5oz. tube packaging. 2. Currently the Soft and Silky shaving gel is priced per ounce at $0.72 oz. Moving to a 10 oz. aerosol can and using suggest retail price of $4.25 bringing the price per ounce to $.43 making it much more competitively priced with in the market. (See appendix C for average and high/low shaving product pricing). 3. Cost of Goods Sold for the 10oz.Soft and Silky shaving gel ($.29) is significantly less than its competitors Gillette and S.C. Johnson (See Appendix C-Pricing) 4. Though Soft and Silky will still be about $.13 higher than its closest competitor (See appendix C, pricing) this may help them to maintain their premium branding. 5. The gross margin for the 10 oz. aerosol can is the highest of the three alternatives. (See Appendix a- Chain Ratio) 6. The forecasted cannibalization rate for the 10 oz. aerosol can is the lowest of the alternatives. Sales lost will be recuperated by the sale of the 10oz aerosol can and will continue to raise overall revenue. (See Appendix B- Cannibalization Rates) 7. A weighted contribution of the forecasted effects of cannibalization indicate a possible gain of almost $100,000, and this is in spite of the low estimate forecast for the 10 oz. aerosol can producing a lost. (See Appendix B- Weighted Contribution) 8. The decision to proceed with production of the 10 oz. aerosol can, without the market test, will require a one-time additional fixed cost of $10,000 resulting in a breakeven volume of 5,715 units,

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