Financial Analysis Scenario Natural Products International (NP) is a health rese

Question

Financial Analysis Scenario Natural Products International (NP) is a health research and manufacturing company which recently discovered that increased sulforaphane (at least 5,000 mg every 2 days) in a person's diet has been able to extend a person's life span by at least 30 years. The company developed a new product called "Sustain Your Life" which is a small tablet that contains 5,000 mg of sulforaphane in each tablet. The health tablet market size is currently measured at 150 million units (15 tablets per bottle) of which NPI serves 35%. NPl plans to launch this new tablet initially across the United States using its current distribution channel of supermarket chains and health food stores which have 25,000 locations combined. The company then plans to expand the product market area to include South America, Europe and Asia and also intends to setup manufacturing plants in these expanded market areas. Natural Products International's fixed cost is currently at $5 million per year with the cost to produce one bottle of 15 tablets at $2.35. The finding of several research studies has determined that consumers would be willing to pay $15.35 for one bottle of 15 tables at which the retail selling price would be targeted. The retailer's margin is 30%, the wholesaler's margin is 20%. Please write clearly-Round partial units upward. Round percentages to one decimal point. Round currenoy to dollars and cents.) a What is the company's selling price of one bottle of 15 tablets to its wholesalers? b. What is the product's contribution margin as a percentage? c What is the product's contribution per unit in dollar?

Explanation / Answer

Question - a

Let the selling price = X

X(1.30) (1.20) = 15.35 i.e the final selling price after adding for retailers and wholesalers margin.

X = 15.35 / 1.56 = 9.84.............Final answer

Question - b

Variable cost per bottle = 2.35

Contribution margin per Unit ( bottle) = 9.84 - 2.35 = $ 7.49 per unit

Product's contribution margin as a percentage = 7.49 / 9.84 * 100 = 76.12% ..... final answer

Question - c

Contribution margin per Unit ( bottle) = 9.84 - 2.35 = $ 7.49 per unit ...... final answer

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