Offer Analysis

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Total Variable cost1.4= Total Cost of Material+ Cost of Labor1.2 +Overhead Expenses for the Product1.3
Materials used for Production of Hair oil. (Ref Page: 51, Statement of Material Consumed: Raw Material Consumed + Packing Material Consumed.) Raw material consumption | Qty (Kg's) | Amount | per kg | Refined oil | 2,766,284 | 224,903,000 | 81 | Light liquid paraffin | 10,173,396 | 755,341,000 | 74 | Perfumes | 286,699 | 279,764,000 | 976 | packaging material – VC | | 677,790,000 | |

Labor Charges from the Wages and Salary Expense: 2657110000 Ref Page: 52, Employee benefit expense: Salaries & Wages)
Therefore Total Labor Charges to include is 0.2*2657110000 =
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2. The order for the shampoo sachets shall be a special order for P&G and therefore they (P&G) shall be willing to be providing the product at a considerably lower price.

Taking the above two assumptions, and the rough margin estimate of the manufacturer in the body care industry we come to an estimated value of the Pantene shampoo sachet to be around INR 12.
The net contribution, (adjusted to the offer) that a single 300ML bottle shall make is therefore Original estimated contribution of 300ML1.9 – Cost of the Pantene shampoo offered free in the advertisement1.91 = INR 42.04
Costs here shall be the incremental cost of advertisement (15,00,000).
Thus the break even units shall be:
Incremental cost of the advertisement/ Adjusted Contribution margin1.92 = 35683 units

Therefore the break even sales value shall be = Total break even units * Selling price of a 300 ml unit
Selling price of a 300ML unit = Selling price of 1 Liter1.7 * (300/1000) = INR 101.4.
Thus break even sales value = INR 3624208.6. 2.
Should the company go ahead with the option of investing INR 15,00,000 on Advertisement:
We think the offer shall definitely help boost the sales of the 300ML units and the company should invest in the advertisement.
We need to consider the sales mix of the SKUs (Ref: Page 31, Saliency of Low unit Selling Price SKUs).
We see that when the 100ML
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