Question: Reflection - Thinking it Through You are to research a consumer product in Canada and approximate the retail price based on at least 3 retail
Reflection - Thinking it Through
You are to research a consumer product in Canada and approximate the retail price based on at least 3 retail locations. The product must be the same in each of those locations. You will then average the 3 prices to arrive at an average price.
You are to research a similar consumer product manufactured in another country and assume the average retail price (use a similar process as above) is marked-up by 100%. You need to calculate the per unit Cost of Goods Sold. Recall that markup = (price - cost)/cost. If price = USD $25 and you need to determine cost and you know markup is equal to 1, then, rearranging:
Markup = (price - cost)/cost
Markup x cost = price - cost
Markup x cost + cost = price
Cost x (markup + 1) = price
Cost = price / (markup + 1)
Plug in $25 for price: Cost = $25/(2) = $12.50
This means that (price - COGS)/price = 50% gross margin.
- You will then need to estimate, using realistic assumptions, how many units of this good could realistically fit in a shipping container filled to 80% capacity that is 20ft x 8 ft x 8ft (length x width x height) and multiply # of units by COGS/unit for value of inventory. Show your work and explain your reasoning.
- Estimate how much it will cost to transport this container from the manufacturer (you will need a specific location) to the shipping port (another specific location).
- Estimate how much it will cost to ship overseas to Canada's port (a specific port) (we will ignore cargo insurance for this assignment) .
- Estimate how much customs will charge for duties (Use HS Code).
- Estimate how much it will cost to transport to a large distributor or warehouse in Canada (you will need a specific location).
- Lastly, you will need to estimate the size (quantity) of a retail order and how much this will cost to ship to the final retail destination.
- Calculate the per unit cost and compare this to the price in the Canadian market of a similar product.
Precision is not the goal here. The goal is to think through the steps and estimate the costs using reasonable figures (labour rate x hours or depreciation rate - try to think of all costs incurred to complete the activity or task - i.e. transportation has labour, truck, materials like gas, etc.). Again, we are approximating using reasonable estimates.
Remember that when shipping up until the distributor or the warehouse, all costs will be distributed on a per unit basis equally and added to COGS/(total shipping container units). When the shipping crate is divided into smaller retail orders, you will need to spread the shipping cost across fewer items and add this to the COGS/(total package units) as well.
If you find it easier, you can submit an excel document or use a table in a word document to keep the information organized.
Guidance and Referencing
Your estimates should be based on information you have found from government agencies, statistical agencies, newspapers, magazines, journals, websites, etc. Be sure to use APA@Conestoga when citing and referencing your work. Remember, you are making a case and the evidence that you present must come from credible sources.
EXCEL TEMPLATE
| Reflection Assignment - Thinking it Through | Reflection Assignment - Thinking it Through | Reflection Assignment - Thinking it Through | |||||||||||||
| What is the consumer product you have chosen? | Transportation Costs (Foreign) | Total Cost Per Unit to Warehouse | |||||||||||||
| Location in Canada of first price? | Location of manufacturer in foreign market? | Cost of Inventory in Shipping Container | |||||||||||||
| Price at first location? | Location of nearest shipping port? | + Sum of transport. Costs to shipping port | |||||||||||||
| Location in Canada of second price? | Distance from manufacturer to shipping port? | + Cost of Shipping by Cargo Ship | |||||||||||||
| Price at second location? | Estimate of fuel economy (l/100 km) | +Duties | |||||||||||||
| Location in Canada of third price? | Estimate of fuel cost (per L) | + Sum of transport. Costs to warehouse | |||||||||||||
| Price at third location? | Total Fuel Cost | = Total Costs to Warehouse | |||||||||||||
| Sum of all three prices? | Wage rate for driver (per hour) | / number of units | |||||||||||||
| Average price? | 0 | Estimate of time for driver to ship to shipping port | =Total Cost per Unit to Warehouse | ||||||||||||
| Mark-up? | Total Wage cost for driver | ||||||||||||||
| Cost of Goods Sold (per unit)? | Purchase Price of Truck | ||||||||||||||
| What is the similar product made in another country? | Estimate of useful life of truck (kms) | From Warehouse/Distributor to Retailer | |||||||||||||
| Location in foreign country of first price? | Distance from manufacturer to shipping port | Estimate of number of units per order | |||||||||||||
| Price in foreign currency? | Estimated depreciation cost of truck | Estimate of cost of shipping per order | |||||||||||||
| Location in foreign country of second price? | Any other costs - explain | Additional Shipping cost per unit to retailer | |||||||||||||
| Price in foreign currency? | Sum of transportation costs to shipping port | 0 | + Total Cost per Unit to Warehouse | ||||||||||||
| Location in foreign country of third price? | Foreign Exchange Rate | = Total Cost per Unit | |||||||||||||
| Price in foreign currency? | Sum of transport. Costs to shipping port (CAD) | Markup for Retailer (use 10%) | |||||||||||||
| Sum of all three prices in foreign country? | 0 | Cost to Ship Overseas to Canada (if going overseas) | = Suggested Retail Price | ||||||||||||
| Average price in foreign currency? | 0 | Name of Port in Foreign Market | Conclusion | ||||||||||||
| Cost of Goods Sold & Cost of Inventory | Name of Port in Canada (be sure you look at a map) | Is the suggested retail price > or < the average price of a similar product in Canada (from part 1)? | |||||||||||||
| Average price in foreign currency? | 0 | Distance Travelled | |||||||||||||
| Mark-up in foreign currency? | Estimated Cost of Shipping by Cargo Ship (CAD)* | ||||||||||||||
| Cost of Goods Sold in Foreign Currency (per unit) | *hint - you may need to research average rates of cargo shipping | ||||||||||||||
| Volume of 1 unit of foreign product | |||||||||||||||
| Size of 1 unit (*hint - you must find the size in cu.ft.) | Custom Fees | ||||||||||||||
| **hint - 6 inches is 6/12 of a foot, so 6"x6"x6" would equal 6/12 ft x 6/12 ft x 6/12 ft or 0.125 cu. Ft. | Duty Rate for chosen product | ||||||||||||||
| Length of 1 unit of foreign product in ft. | Cost of inventory in shipping container (CAD) | ||||||||||||||
| Width of 1 unit of foreign product in ft. | Duties Collected by Customs | ||||||||||||||
| Height of 1 unit of foreign product in ft. | Transportation Costs (Canada) | ||||||||||||||
| Volume of 1 unit of foreign product | 0 | Location of shipping port in Canada? | |||||||||||||
| Volume of Shipping Container | Location of nearest warehouse? | ||||||||||||||
| Length of shipping container in ft. | Distance from shipping port to warehouse? | ||||||||||||||
| Width of shipping container in ft. | Estimate of fuel economy (l/100 km) | ||||||||||||||
| Height of shipping container in ft. | Estimate of fuel cost (per L) | ||||||||||||||
| Volume of shipping container in cu. Ft. | 0 | Total Fuel Cost | |||||||||||||
| 80% of volume of shipping container | 0 | Wage rate for driver (per hour) | |||||||||||||
| Estimate of time for driver to ship to warehouse | |||||||||||||||
| Total wage cost for driver | |||||||||||||||
| Number of units per shipping container | Purchase Price of Truck | ||||||||||||||
| 80% of volume of shipping container | Estimate of useful life of truck (kms) | ||||||||||||||
| Volume of 1 unit of foreign product | Distance from shipping port to warehouse | ||||||||||||||
| Number of units per shipping container | Estimated depreciation cost of truck | ||||||||||||||
| Cost of goods Sold in Foreign Currency (per unit) | Any other costs - explain | ||||||||||||||
| Total Cost of inventory in shipping container (foreign currency) | Sum of transportation costs to warehouse | 0 | |||||||||||||
| (*hint - cost per unit x # of units) | Foreign Exchange Rate | ||||||||||||||
| Foreign Exchange Rate | Sum of transport. Costs to warehouse (CAD) | ||||||||||||||
| Total Cost of inventory in shipping container (CAD) |
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