The aim of product profitability analysis is to trace all relevant costs that are associated with the manufacture and marketing of the product and thereby, compare them with the revenue it generates. It is a useful tool as it informs the management team about the profitability of a certain product in the current market and eventually aids in a host of important managerial decisions like fixing the product price or constructing a product portfolio.

Sample Product Profitability Analysis

Name of the Company: D.L Cosmetics

Analysis conducted by: Richard Castle

Purpose: To study the profitability of the range of cosmetic products launched this season.

Products Analyzed: The products to be surveyed are the ones that have been launched in this spring. It includes the new summer cool soap, the exciting new fragrances offered through the new range of deodorants and the new sandalwood prickly heat powder. The products have been launched last month and are aimed at the customers looking for cool refreshing cosmetic products designed exclusively to rejuvenate oneself in the approaching summer heat.

Market Review: The products have been well accepted in the market, especially with the new deodorant collection being an instant hit with the youngsters. The initial bunches have already been reported to be sold and the rising demands have now triggered mass production of these goods.

Profitability Analysis:

Product Name Product Cost Revenue Profit%


Cool Soap                                                           500000$                                800000$                28.5%

 

Refresh Deodorants                                       956000$                       1000000$      48.3%

 

Wow prickly heat powder                            154000$                                  214000$                 23.2%

 

Total                                                                      1600000$                                2000000$              100%

 

Inference: The products can, thus, be considered a success in terms of their ability to generate profits


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