Product Profitability Analysis: Sales Volume and Pricing Strategy
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Part C: Financial Performance Analysis
Analysis of Price Meeting Strategy Across All Products
1. Sales Volume by Product and Region
Sales Volume | Alpha | Beta | Gamma | Delta | Total |
|---|---|---|---|---|---|
Internal | 2.500 | 2.800 | 3.900 | 3.150 | 12.350 |
Europe | 1.050 | 630 | 1.260 | 735 | 3.675 |
Asia | 1.725 | 690 | 1.035 | 3.623 | 7.073 |
Totals | 5.275 | 4.120 | 6.195 | 7.508 | 23.098 |
2. Sales Price per Unit by Product and Region
Sales Price | Alpha | Beta | Gamma | Delta | Total |
|---|---|---|---|---|---|
Internal | 75 | 90 | 89 | 95 | |
Europe | 71.25 | 85.50 | 84.55 | 90.25 | |
Asia | 67.50 | 81 | 80.10 | 85.50 |
3. Sales Revenue Calculation
Sales Revenue | Alpha | Beta | Gamma | Delta | Total |
|---|---|---|---|---|---|
Internal | 187.500 | 252.000 | 347.100 | 299.250 | 1.085.850 |
Europe | 74.813 | 53.865 | 106.533 | 66.334 | 301.544 |
Asia | 116.438 | 55.890 | 82.904 | 309.767 | 564.998 |
Totals | 378.751 | 361.755 | 536.537 | 675.350 | 1.952.392 |
4. New Profit Situation and Cost Analysis
Cost/Profit Metric | Alpha | Beta | Gamma | Delta | Total |
|---|---|---|---|---|---|
Variable Costs and Direct Expenses | |||||
Variable Cost/Unit | 49.00 | 60.50 | 53.50 | 62 | |
Total Variable Cost | 258.475 | 249.260 | 331.433 | 456.496 | 1.304.664 |
Direct Exp. | 1.000 | 600 | 550 | 900 | 3.050 |
Total Marginal Cost | 259.478 | 249.860 | 331.983 | 466.396 | 1.307.714 |
Contribution | 119.276 | 111.895 | 204.554 | 208.955 | 644.680 |
Fixed Costs | 15.000 | ||||
Profits | 629.680 | ||||
Part D: Strategic Profit Comparison and Recommendation
A comparison of the profit outcomes under different strategic scenarios:
- Initial Profit: £673.950
- Post Make/Buy Strategy: £678.770
- Post Price Cost + Increased Volume Strategy: £629.680
Based on this analysis, the Make/Buy Strategy generated the highest profit (£678.770).
Recommendation: Due to the higher profits generated by the Make/Buy strategy, it is strongly recommended that the company adopts this method, as it maximizes cash generation for the business.