Jones Blair Company Essay
GROUP:
BM7702P
1. Company Description
1.1. U.S Paint Industry The US paint industry is divided into three broad segments which are:
a. Architectural coatings consist of general-purpose paints, varnishes, and lacquers used on residential, commercial, and institutional structures, sold through wholesalers and retailers, and purchased by do-it-yourself consumers, painting contractors and professional painters.
b. Original equipment manufacturing (OEM) coatings are formulated to industrial buyer specifications and are applied to original equipment during manufacturing. These coatings are used fro durable goods such ad automobiles, trucks, transportation equipment, appliances, furniture and fixtures, metal containers and building …show more content…
This is based on the extremely high quality and performance of the products. By cutting price, Jones Blair will be able to stay competitive in price with other the other products on the market.
In 1997 architectural product sales volume was $12,000,000. Jones Blair has a current net profit of $1.14 million, and to stay profitable it must maintain this amount.
$12,000,000*.35= $4,200,000
If Jones Blair reduced its price by 20% the contribution margin will drop to 15%.
New contribution margin = 35 % (current contribution margin) – 20% (price reduction) = 15%
How much sales will John Blair achieve with this new contribution margin?
($ 12,000,000 + X) * 15% = $ 4,200,000
$ 1,800,000 + 0.15X = $ 4,200,000
0.15X = $ 2,400,000
X = 16,000,000 (New Sales Volume)
$16,000,000 – $12,000,000 = 4,000,000 (Sales Increase Amount)
$4,000,000 / $12,000,000 = 0.33 = 33% (Sales Increase)
Referring to the above simulation, 20% price reduction will drive the company to a 33% increase in …show more content…
A sales rep would cost the company $60,000 a year. So the company would need about $171,428.58 ($60,000/.35) of additional profits to cover this yearly cost. Current existing 120 retailers are located outside of DFW. From the current achievement, $4,200,000 is the amount needed to be maintained in order for Jones Blair to stay profitable. Profit amount required from each retailers in order to maintain the profit is $35,000 ($4,200,000/120). From the figure, Jones Blair would acquire at least 5 new accounts in order to get breakeven return on new representatives’ investment ($171,428.58/$35,000 =
BM7702P
1. Company Description
1.1. U.S Paint Industry The US paint industry is divided into three broad segments which are:
a. Architectural coatings consist of general-purpose paints, varnishes, and lacquers used on residential, commercial, and institutional structures, sold through wholesalers and retailers, and purchased by do-it-yourself consumers, painting contractors and professional painters.
b. Original equipment manufacturing (OEM) coatings are formulated to industrial buyer specifications and are applied to original equipment during manufacturing. These coatings are used fro durable goods such ad automobiles, trucks, transportation equipment, appliances, furniture and fixtures, metal containers and building …show more content…
This is based on the extremely high quality and performance of the products. By cutting price, Jones Blair will be able to stay competitive in price with other the other products on the market.
In 1997 architectural product sales volume was $12,000,000. Jones Blair has a current net profit of $1.14 million, and to stay profitable it must maintain this amount.
$12,000,000*.35= $4,200,000
If Jones Blair reduced its price by 20% the contribution margin will drop to 15%.
New contribution margin = 35 % (current contribution margin) – 20% (price reduction) = 15%
How much sales will John Blair achieve with this new contribution margin?
($ 12,000,000 + X) * 15% = $ 4,200,000
$ 1,800,000 + 0.15X = $ 4,200,000
0.15X = $ 2,400,000
X = 16,000,000 (New Sales Volume)
$16,000,000 – $12,000,000 = 4,000,000 (Sales Increase Amount)
$4,000,000 / $12,000,000 = 0.33 = 33% (Sales Increase)
Referring to the above simulation, 20% price reduction will drive the company to a 33% increase in …show more content…
A sales rep would cost the company $60,000 a year. So the company would need about $171,428.58 ($60,000/.35) of additional profits to cover this yearly cost. Current existing 120 retailers are located outside of DFW. From the current achievement, $4,200,000 is the amount needed to be maintained in order for Jones Blair to stay profitable. Profit amount required from each retailers in order to maintain the profit is $35,000 ($4,200,000/120). From the figure, Jones Blair would acquire at least 5 new accounts in order to get breakeven return on new representatives’ investment ($171,428.58/$35,000 =