Problem
A manufacturer of high quality protein powder currently sells directly to consumers for $60 per container of protein. They are considering using a wholesaler and selling a case of 6 containers for $200 to their wholesalers. The wholesaler will want to collect a 40% margin on their sales. The retailer expects a 20% margin. The variable costs container of protein is $7.50. The manufacturer has fixed costs of $15,000 per month.
• Illustrate the distribution channel for the NEW indirect sales method. Indicate the PRICE that each channel member will pay for ONE container for protein. Also include the price for the final consumer.
• Calculate the monthly break even point for the MANUFACTURER under the NEW proposed sales channel.
• The manufacturer currently sells 500 containers in a month. The new wholesale arrangement will see sales increase by 1000 containers. Would you sign a contract with the new wholesaler? WHY or WHY NOT?