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The Energy Drink of Champions - Essay Example

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In the paper “the-energy-drink-of-champions” the author examines introduction of Supa-E, the energy drink of champions. The market requires a healthy alternative to those that currently exists and Supa-E will fill that requirement. The introductory price for Supa is expected to be £1.5…
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The Energy Drink of Champions
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Download file to see previous pages Supa-E will be packaged in plastic bottles. Plastic bottles are popular for packaging all types of drinks and food items and there are a number of reasons for this. These reasons include and are not limited to the following:
Convenience - Plastic bottles are convenient to carry around because they are lighter than the alternatives available (British Plastics Federation n.d.)
Recyclability – PET bottles are capable of being recycled and so it can be used several times
Light weight - They are lighter to transport to retail outlets and therefore reduces the GHG emissions associated with transporting goods;
Lower Cost - Plastic bottles are cheaper than all other alternatives
The drink will be sold in 400ml bottles. It will be distributed to bars, grocery stores, supermarkets and hyper-markets. The distributors will be responsible for the in store promotion and launch of Supa-E. In terms of advertising a very prominent advertising firm has been engaged to produce the advertisement which will start airing a week before the launch of the product. A well recognised athlete will be engaged in our advertising campaign.
Marginal Income Statement
The marginal income statement which is provided in Appendix 1 shows the direct costs associated with the production of Supa-E. It also shows the contribution and fixed cost to produce the product. The statement combines the cost of direct material and labour. The reason for this is that the production of Supa-E has been outsourced. The only thing that is done in-house is the design of the labels....
A well recognised athlete will be engaged in our advertising campaign. Marginal Income Statement The marginal income statement which is provided in Appendix 1 shows the direct costs associated with the production of Supa-E. It also shows the contribution and fixed cost to produce the product. The statement combines the cost of direct material and labour. The reason for this is that the production of Supa-E has been outsourced. The only thing that is done in-house is the design of the labels and administrative activities such as accounting. Everything else is done by persons external to the business. The materials include the plastic bottle which is very cheap. The manufacturer uses the same bottle to package their products and so the price for each bottle is very low. In fact, if the bottle was purchased by the business it would cost two to three times more. The contribution per unit is more than two times the direct cost of the product. This means that it can provide a buffer when the market gets very competitive. This is good for times when sales are slow. Break-even analysis The break-even point represents the point where total cost is equal to total revenue (Horngren et al 2000). This is the point where the business neither makes a profit nor incurs a loss. This point is shown in the table in Appendix 2. The table indicates that the production of 644,905 units is required in order to break-even. Therefore, it is important that the product is properly advertised and promoted. The sales revenue and total cost to be incurred at the break-even point is ?967,358. Cash Budget A cash budget is a very useful tool in accounting. It is ...Download file to see next pages Read More
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