This paper will focus on Hotel Complimentary Products Limited whose complimentary offerings include hygiene bags and dispensers. The Hygiene bag dispensers cost £6.00 in London and are available in White and Chrome. The complementary refill packs cost £4.5 and contain up to 25 bags. In addition, loose hygiene bags are made available for customers who do not require the dispensers. Further, a discreet and convenient sanitary disposal technique is facilitated by a standard box quantity of 24 boxes x 25 bags. Their hygiene bag dispenser systems are designed to essentially provide clean, safe and convenient techniques of disposing of wastes where genera provisions are not provided. The company’s compact and discreet dispensers are mounted on walls and give an image that portrays ‘concern and care’ by the hospitality service provider.
These hygiene bag dispensers come in two distinct finishes, which are white and chrome which are essentially designed to match up most washroom decors. They are easy to install as they have double-sided adhesive pads that facilitate wiping clean the moment they are in position. Through innovation, the poly hygiene bags are white gusseted and then removed from dispensers as the users require them. Each of the refill packs contains market leading hygiene bags (50 pieces) per pack, which makes them rather cost effective as compared to other available hygiene bag systems. These prices are comparable to those of Direct Hygiene Hand Dryers who are major suppliers of these products in the hospitality industry as well. LADYSAFE Hygiene Bag Dispensers are made of Polished Chrome and sold at £18.99. Direct Hygiene Hand Dryers’ package comes in a pack containing disposal bag dispenser, free installation with provision of double-sided adhesive pad, Single bag delivery, capacity of a pack of up to 50 Ladysafe bags with dimensions of H175 x W122 x D33mm. Part B:
Basic-target selling price:
Hotel Complementary Products limited is a company providing hygiene bag dispensers to hotels. The Hygiene bag dispenser that primarily comes in two colors: white or chrome; Costs £6.00. A complimentary refill pack that contains up to 25 bags comes at a price of £4.50. The total cost for the obtainment of such a package would come to £10.50. This is the basic target-selling price of the company. A close comparison to competing companies such as the LADYSAFE Hygiene Bag Dispenser, shows that there are selling a similar product at the price of £18.99. This means they are selling at a higher price compared to Hotel Complimentary Products Limited. This is a surplus of close to £8.49. A survey of the market shows that other companies also do this because their refill package is made up of 50 packs. These increase the selling price and therefore much more expensive compared to that sold by Hotel Complimentary Products limited.
Per unit cost statement:
The per unit cost statement of the product being sold will cover the cost that was incurred in the production of the product including the labor, the raw materials used, as well as other manufacturing overhead costs. Other costs to be factored in this statement are those of advertisement, as well as day-to-day costs that are incurred in the production process such as the delivery expenses, and other office costs that go hand in hand with the product. In this case, the raw materials are plastics and the machinery to make the process work.
The table below shows the breakdown of the per unit cost statement.
Break-even analysis:
This analysis helps offer an insight into the amount of time that the company will take to return the amount of money that was invested. Assuming the company has invested £ 1,500,000 in the business and that 100,000 units are sold in a year. From the table above it is evident that the products undergo a per unit production cost of £ 8. The set target of 100,000 products will provide the contribution for their sales. After the total production cost for the products is subtracted from the sales made, will give an indication of the company’s profits.
Five Year Budget Income Statement:
The table below shows the five-year budget income statement for the organization.
Calculating the net present value:
In calculating the net present value of the investment after five years, the following calculations were made:
The investment amount is £ 1,050,000. From the calculation done above, it is evident that the organization’s profit for the first year will be £ 240,000. It is assumed that in the subsequent years the company will be able to increase its profit by 2% each year.
The business is on an upward trend that is clearly shown in the net present value calculation. It continues to show that in two years profits will be made such that the business will break even. This however is not the only goal of the business; the business needs to attain a positive cash flow that will keep the business afloat, and then later improve on its financial position. This means expanding and increasing in sales. For this to happen, the company needs to reduce on operation cost, maximize on profits without compromising on the value of the end product. Of utmost importance is ensuring that the product is of high quality; and to maintain the customer loyalty that will provide the cash flow.
This results in a positive cash flow for the product that is being marketed by the company. The individuals that are receiving the product do so at a cheap comfortable price. This allows them the flexibility that they would have otherwise not received from the competitor’s products. The positive cash flow that is generated from this business is on the other hand an increase in returns from the company that will provide a projected breakeven point in roughly six months of the product being rolled out. Generally, the sales are much higher compared to the overhead, variable and fixed costs of producing the product.\
The business is sound on the basis of the various projections that have been made. The constant reinvention and improvement will guarantee that the businesses flourishes and that the investors are provided with the benefits they expect from the investments they made. Competition is good for this business as it maintains a high level product quality in the competing businesses. It also allows the clients the freedom of choice, this company is using that information to its advantage by providing good quality products at a cheaper price, guaranteeing continued exemplary performance in its market share.
The refill pack sold by Hotel Complimentary Limited contains 25 bags that are made of plastic and are easy to fix. This reduces the baggage as well as the price. With such a small package, this company is capable of maximizing in amount sold since more and more companies (Hotels) will be willing to buy the product since it is cheaper. Selling at this price will on average provide sales amounting to roughly £105.00 for a client base numbering to ten Hotels. This would push out the competition, and further increase their market base as well as the cash flow resulting from the business. In the case of competing companies, unless the consumption of the dispenser and its bags is extensively huge, then the clients will tend to purchase the cheaper product.
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