Exercise 6

A company plans on introducing a new sort of toothpaste into a market with a population of 10,000 people. From a survey, they know that 20% of people would definitely buy the toothpaste and that 10% of people would probably buy the toothpaste. The company will launch an advertising campaign that will raise awareness to 70% and will make sure that its ACV is 90%. People will buy 1 tube of toothpaste when trying it out. The company expects 60% of people to continue using the toothpaste, buying 1 unit on 6 occasions (after they bought the initial 1 tube of toothpaste to try). The variable cost per tube of toothpaste is $1.5. The fixed costs are $1500 in total.

• Estimate the total volume that the company expects to sell.
• Use this total volume to determine what the selling price of one bar of toothpaste should be to break even.
• Use this total volume to determine what the selling price of one bar of toothpaste should be to reach a target profit of $2000.