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Essay / Research Paper Abstract
A 4 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:
4 pages (~225 words per page)
File: CC6_KSacctBrkevnAlma2.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, the
Easy Embers Charcoal Starter models ED-12 and ER-12. Brighton and Henley would contract a manufacturer to produce and package the product 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 Of course Alma Products needed to establish a price that would return a profit in the future. 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 of 10,000 pieces would cost only $30,000, but Almas principals do not yet know if there will be subsequent
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