G-Skimming or Penetration? You are hired as a product manager at a camping product company that h…

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g-Skimming or Penetration? You are hired as a product manager at a camping product company that has new lightweight, collapsible drinking cup for backpackers. You are considerning t developeda $7 50 prices for the product -$7.50 or $4.50. Research has estimated that at the $7.50 .50 price the price the first year market will be 200,000 units, plus or minus 20%. At the S4 first year market is estimated at 600,000 u ts, plus or minus 30%. In either case, manufacturing costs (variable coss) will be $2.80 equipment will be $50 thousand. Since the product will simply be added to the company’s line, other expenses,s either volume level. per unit and fixed costs for plant and s, such as advertising costs, will be minimal. You estimate $15 thousand at You are trying to decide whether to use a price skimming or penetration strategy. Because you have heard that a major competitor is working on a similar unit, you are afraid that you will have very little lead time- a month or two at the most. You have filed for a patent on the product but are not sure that it is patentable. At the same time, you have to introduce the tely to be in the market in time for the backpacking season. to be in the product Questions: 1. What are your project 3. What decision do you make, skimming 5. What additional information would you like to know to make a more informed wt are your breakeven points for the skimming and penetration prices? What are your assumptions and considerations that led you to this decision? decision? are your projected sales and profits at the skimming and or penetration? Why? Notes: Break-even = Fixed Cost/Contribution Margin Contribution Margin = Selling Price-Variable Unit Cost Guideline Marn Unit Cost You should submit the report in a hard-copy, using a similar format as this memo. ld answer all five questions clearly, AND include a comprehensive 2. Your report should answer all ive questions clearly, AND include a comprehensive 1. break-even analysis (ie, upper and lower bounds of estimation are considered). DUE BY THE BEGINNING OF CLASS Tuesday, July 11h, 2017

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