SLP 3 - Time Warp Essay Example | Topics and Well Written Essays - 1250 words

SLP 3 - Time Warp - Essay Example The pricing allocation thus tabulated as follows. The table above is a clear indication of Sally’s pricing and R&D product growth decision for the years 2012 to 2015; it shows the progress in its products X5, X6 and X7. Starting with product X5: setting the product price at $272, R&D total budget will be $22, 000,000, we can thus allocate 30% to the R&D, set the fixed cost at $4,400,000, target profit at $5,000,000, and variable cost per unit at $134. This will give a R&D costs at $6,600,000. From our profit expectation of $5,000,000 with the indicated price, we need to sell 115,942 units, which will give us sales revenue of $31,536,231.88, and ROS stands at 15.85%. Profit allocation $1,000,000 For the second year, which is 2013, our target profit will be $7,000,000. The fixed costs will be $5,000,000, while the variable cost per unit stands at $140. If prices are maintained at $272, then we have to sell 140,909 units to achieve that profit. For this year, the sales revenue wi ll be $38,327,327.73. While the ROS will stand at 18.26%, which is an indication of a positive change and growth from the first year by growth rate of 2.41 %, this shows a progress in the company’s development. ... This implies that the sales team needs to triple their efforts because this will mean an increase of almost 150% in sales: a rise from 140,909 units to 542,902 units. However, this is because the plans are combined for the two final years as the economy is expected to be stable during this period thus the need to stabilize the sales (Duffie & Singleton, 2003). An analysis of the second product that is X6 indicates that, plans are expected to be carried out in the same way as X5 because all these products are the one driving the growth of the company. However, Product X6 is of higher demand, and it is scarce in production. Therefore, its price will be more than the one of product X5. For this case, year one (2012), the selling price is set to be $410. Since the expected profit for this year was $5,000,000, the fixed cost was $4,400,000, and the cost unit/price will be $160. Using this information, from the CVP calculator, it implies that we need to sale 64,000 units of this product to achieve that expected profit. The sales revenue from this will stand at $26,240,000.00, while the ROS is 19.05%. With these results, the company does not need to discontinue any product because there are positive returns up to this point. For the year 2013, the firm expects a profit from this product to be $12,000,000, and its fixed cost stands at $35,000,000. Calculations from the CVP calculator indicate that the firm has to sell about 224,960 units of the product, and the sales revenue will be $92,233,600.00. While ROS for this year amounts to 13.01%, this shows a decline on the ROS from the previous 19.05% to 13.01%. Profits expectations for each product through the four years 2012 2013 2014 2015 X5 $5,000,000 $7,000,000 $10,000,000 $12,000,000 X6 $5,000,000 $10,000,000