Calculating Fixed + Variable Cost

60,000
50,000
110,000

Annual fixed cost

Annual variable cost
Annual fixed + variable cost

Calculating Cost Price Per Cup

Earl Grey
0.25

cost of tea
sales performance
sales per day
sales per year (365 days)
(fixed + variable) cost per cup based on sales
total cost of tea per cup (incl. fixed + variable cost)

low
4500
1642500
0.0669710807
0.3169710807

Max cost per cup (2 decimal round up)

0.32

Calculating Selling Price Per Cup (Based on 1600:340

Type of tea
cost per cup
cups sold per day (based on 1600 : 3400 ratio)
cups sold per year (365 days)
cost incurred per year

Earl Grey
0.32
1600
584000
186880

Total cost incurred per year for sale of both teas (denote as [C])

proposed selling price (estimate 6x cost price profit)

revenue per year

Based on Product Orientation Price Setting

1.95
1138800

Total revenue per year for sale of both teas (denote as [R])
Annual Profit : [R] - [C]
Monthly Profit

Calculating Selling Price Per Cup (Based on 1500:350

Type of tea
cost per cup
cups sold per day (based on 1500 : 3500 ratio)
cups sold per year (365 days)
cost incurred per year

Earl Grey
0.32
1500
547500
175200

Total cost incurred per year for sale of both teas (denote as [C])

proposed selling price (estimate 6x cost price profit)

revenue per year

Based on Product Orientation Price Setting

1.95
1067625

Total revenue per year for sale of both teas (denote as [R])
Annual Profit : [R] - [C]
Monthly Profit

Things to note:
PO = Product Orientation ; MO = Market Orientation
Annual Profit Difference based on PO for 1600:3400 to 1500:3500 ratio
Annual Profit Difference based on MO for 1600:3400 to 1500:3500 ratio
Annual Profit Difference from MO to PO based on 1600:3400 ratio
Annual Profit Difference from MO to PO based on 1500:3500 ratio

+ Variable Cost
60,000
50,000
110,000

60,000
50,000
110,000

60,000
50,000
110,000

60,000
50,000
110,000

60,000
50,000
110,000

Price Per Cup

Earl Grey
0.25
0.25
average
high
5000
5500
1825000 2007500
0.060274 0.054795
0.310274 0.304795

English Breafast
0.13
0.13
0.13
low
average
high
4500
5000
5500
1642500 1825000 2007500
0.066971 0.060274 0.054795
0.196971 0.190274 0.184795

0.32

0.2

p (Based on 1600:3400 ratio)

Earl Grey
0.32
1600
584000
186880

English Breakfast
0.2
3400
1241000
248200
435080

ntation Price Setting

1.95
1138800

1.25
1551250
2690050
2254970
187914.166666667

(Based on 1500:3500 ratio)

Earl Grey
0.32
1500
547500
175200

English Breakfast
0.2
3500
1277500
255500

430700

ntation Price Setting

1.95
1067625

1.25
1596875
2664500
2233800
186150

-21170
4380
868700
894250

Calculating Selling Price Per Cup (Based on 1600:3400

Type of tea
cost per cup
cups sold per day (based on 1600 : 3400 ratio)
cups sold per year (365 days)
cost incurred per year

Earl Grey
0.32
1600
584000
186880

Total cost incurred per year for sale of both teas (denote as [C])
Based on Market Orientation Price Setting
proposed selling price (based on competitor information)
1.95
revenue per year
1138800
Total revenue per year for sale of both teas (denote as [R])
Annual Profit : [R] - [C]
Monthly Profit

Calculating Selling Price Per Cup (based on 1500:3500

Type of tea
cost per cup
cups sold per day (based on 1500 : 3500 ratio)
cups sold per year (365 days)
cost incurred per year

Earl Grey
0.32
1500
547500
175200

Total cost incurred per year for sale of both teas (denote as [C])
Based on Market Orientation Price Setting
proposed selling price (based on competitor information)
1.95
revenue per year
1067625
Total revenue per year for sale of both teas (denote as [R])
Annual Profit : [R] - [C]
Monthly Profit

up (Based on 1600:3400 ratio)

Earl Grey
0.32
1600
584000
186880

English Breakfast
0.2
3400
1241000
248200
435080

entation Price Setting

1.95
1138800

1.95
2419950
3558750
3123670
260305.833333333

p (based on 1500:3500 ratio)

Earl Grey
0.32
1500
547500
175200

English Breakfast
0.2
3500
1277500
255500

430700

ntation Price Setting

1.95
1067625

1.95
2491125
3558750
3128050
260670.833333333