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.
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