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Essay / Research Paper Abstract
A 6 page breakeven analysis for a new charcoal starter product offered by Alma Products. Alma’s principals are not overly concerned with making a profit during the first year, but neither should the company sell the product for a low price at the outset only to raise it later. The paper recommends prices at which retailers and mail order houses should sell the product. Bibliography lists 3 sources.
Page Count:
6 pages (~225 words per page)
File: CC6_KSacctBrkevnAlma.rtf
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Unformatted sample text from the term paper:
Julie Brighton and Jim Henley met in business school at Stanford and had been friends ever since. The two determined to design and market a new product, one
that they would contract a manufacturer to produce and package for them. The fabricator also would ship the product to various retailers and wholesalers so that the company, Alma
Products, would not have to maintain warehouse space. The result was that Almas overhead costs were quite low. They were able to
determine a selling price based on zero net profit, desiring only to break even during their first year. Determining Breakeven The problem lay
in where to set the price for the product. Small retailers offered a similar product for $9.95; Brookstone offered a similar product in its catalog and its retail stores
for $16.00. This price range gave Alma some freedom in pricing its own charcoal starter. By definition, the breakeven point is that
at which no profit is made. Neither is any money lost, and for Alma, this meant that it would need to sell all items produced in the first lot
of 10,000 charcoal starter products. Though the fabricator quoted a unit price of $3 for 10,000 pieces, it also would charge a $10,000 set-up fee that Alma would need
to pay only once. Thus the total production cost for the first lot of 10,000 would be $40,000 to Alma. Subsequent lots would be less costly by $10,000,
but Almas principals do not yet know if there will be subsequent lots. They want to ensure that they lose no money on the first lot before they consider
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