In this case, we have a base logic for R&D allocations -- the X6 needs to be feature-rich in order to attract buyers. The X7 needs only to be current in its features. The X5 is more or less locked into a particular sales, revenue and profit trajectory. Adjustments made at this point in the product life cycle may impact total company profitability by a few million in either direction, but the real profit potential lies in the X6 and X7. Under Joe Schmoe the X6 had a contribution margin of $400 -- 250 = $150. I hypothesized that if the features were improved I could raise the price and therefore the contribution margin. I delivered a margin of $450 - $250 = $200 or $50 more contribution margin than the Schmoe strategy. This came at a cost of a $6.6 million increase to the R&D cost. In 2007 for example this equated to $8.50 per unit, meaning that I added $41.50 per unit to the net profit. This came at a slight reduction in sales. Schmoe sold 5.363 million units and I sold 5.298 million units. Thus, for the X6 Joe did $150 * 5.363 = $804.45 million in profit. I did $191.50 * 5.298 = $1,014.56 million in profit. This is because there is low price elasticity of demand on the X6, especially when its features are improved. The next strategy will build on that theory, testing the upper limits of profitability for the product. Using the price elasticity...
The above table indicates that the sales volume which is required in order to achieve a $100 M. profit at a price of $245 with an R&D investment of 30% is 1,676,190 units. This is calculated by dividing the total revenue accrued by the unit price. X6: The product X6 has been in the market for a total of 2 years. Unlike the product x5, the customers take great consideration of the
Profit Analysis and Costing for the 21st Century Value costing is about looking at the different aspects of a business paying particular attention to the opportunity cost they represent, how much they are likely to financially benefit a firm, and how much they are likely to cost it. Through this analysis, it is possible to determine the parts of the business that function the most efficiently and locate the parts
Managerial Accounting Cost-volume-profit analysis is a tool used in managerial accounting that helps companies to determine the level of production (and sales) required by the company to break even. In CVP analysis, costs are separated into fixed and variable costs. The assumption is that the fixed costs do not change, while the variable costs do change with the level of production. Once sales are taken into account, so are variable costs,
CVP is very useful for small business also because the analysis takes into consideration variables like Return on Investment, or Customer Acquisition Cost. This analysis allows the company to determine what the maximum profit volume can be, and how the above mentioned variables can be changed in order to become successful. CVP analysis is also able to determine the results of media campaigns, especially for small business, where results are more visible and can be observed after
profit loss statement Virtual Organizations: • Riordan • McBride • Kudler Describe important elements, noting means company. Profit and Loss Statement for McBride Plc. McBride Plc. has enjoyed a positive increase in its financial results, as it is best revealed throughout their most recent income statement. Starting at the end of the statement, where the costs are deduced from the incomes, it is revealed that the company has generated a net
Financial Statement Analysis Westpac (WBC) Westpac banking corporation is one of the largest banking organizations in Australia, and the largest bank in New Zealand. Westpac provides arrays of banking and financial services in Austria, which include institutional banking, retail banking, and wealth management services. Established in 1817, Westpac is the first bank established in Australia. Since its formation, Westpac has increased in its strength, and at present Westpac has the market capitalisations
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