A business report on the forecasted analysis of EcoGenics, Inc. Company with two products

17811754762500TO:Bank Manager

TO:Bank Manager


A business report on the forecasted analysis of EcoGenics, Inc. Company with two products


A business report on the forecasted analysis of EcoGenics, Inc. Company with two products

10801357653655EcoGenics, Inc.

November 30, 2012

Authored by: YOUR Student ID

100000100000EcoGenics, Inc.

November 30, 2012

Authored by: YOUR Student ID


A business report on the forecasted analysis of EcoGenics, Inc. Company with two products

Table of Contents

Company overview1

Product cost estimate2

Variable costs3

Fixed Costs4

Selling Price estimate4

Cost plus price4

Market Price4

Break even analysis4

per product5

Company Break-even5

five year financial projection5

operational budgets5

five year income statements6

investment appraisal6

net present value6

conclusion and recomendations6



environmental impact7

reflective essay7



Section A

About Our Company

EcoGenics is a United States of America based company that specializes in the manufacture and distribution of high quality, plant-based (herbal) skin care products. The company was voted as the “Best Skin Care in America” in the years 2012 and 2013. Our company offers a simple and yet streamlined group of two products (Micro-Dermabrasion Cream and Mineral Masque Soufflé) both of which we are planning to start exporting to the United Kingdom. Each of these products is specially designed to offer a multi-functional effect and to be suitable to all types of skins, people of all ages as well as ethnicities. Our formulas are quite unique and are a combination of both science and nature. Our products employ the healing powers of nature in combination with the most advanced and top of the range anti-aging technology.

Our products

Our products are as follows;

1.Micro-Dermabrasion Cream

The primary benefits of this cream are that it offers a Spa Quality and appeal Microdermabrasion treatment right at home, it renews and polishes, exfoliates, smoothes as well as rejuvenates the surface of the user’s skin surface. The product generally weights 59.18g and is priced at £25.


The benefits of this product is that is reveals a younger, more even toned and smoother skin. It also reduces the appearance of aging as well as evidence of uneven skin tone. The product employs unique diamond shaped particles/crystals like the ones used in the various top of the range professional microdermabrasion machines. These kinds of crystals are quite advanced and are suspended in a vitamin matrix that is a highly enriched cream based with a combination of Olive Oil and Soy.

The product sloughs off the dry, dull and unwanted dead cells with the user’s skin still retaining its moisture. It also helps in reducing the enlarged pores as well as eliminates black heads. With just one application, results become visible. The regular use of our products is guaranteed to help in brightening the one’s complexion as well as reduce the appearance of wrinkles and fine lines. Ultimately, the product leaves our clients with a brighter and even fresher appeal coupled with a strikingly youthful glow!

2. Mineral Masque Soufflé

The primary benefits of this product are that it deeply cleans as well as re-mineralizes our skin. It also helps in fighting acne.

The Benefits

This product would allow our customers to indulge and greatly enjoy a spa treatment in the very privacy of their own homes. Mineral Masque Soufflé is a lightweight whipped product that employs Kaolin clay for the purpose of tightening and deep cleansing the skin. The product is naturally rich in Deep Sea Mud and minerals and helps in the re-mineralization of the skin while it absorbs all the excess impurities and oils. This product cleanses the pores and this ultimately helps in brightening the skin tone as well as texture. This product ultimately leaves one’s skin feeling very velvety smooth and yet soft and supple at the same time. Additionally, the product contains a Chamomile Extract that calms the skin. The product also has a very refreshing spearmint fragrance that cools after and every use. Our product helps in fighting Acne, provides a balanced complexion while also providing a natural glow to the user’s skin.

The Trends

Even though the concept of skin care in the UK has greatly been impacted by very low levels of consumer confidence, very high growth rates are expected especially after the recession and economic downturn (Euromonitor,2012,p.1).This is because, immediately after the global recession, it was noted that skin care in the United Kingdom was one of the main categories that was less impacted or affected due to the fact that women continued to deeply indulge themselves.


As of 2011, the global giant Proctor & Gamble Ltd maintained its lead as the major player with close to 10% market share. The company has managed to maintain its leading position in the United Kingdom through its Olay skin care product range. Its main products that offer competition to our products are Olay Professional’s Age Defying Day Moisturiser having SPF 30 as well as Olay 2-in-1 Day Cream plus Serum.


The UK skin care industry is expected to see a 2 percent constant value CAGR between the years 2011 and 2016 to attain £2.4 billion at the constant 2011 prices (Euromonitor,2011,p.1).


In order to beat competition, our company has engaged the best minds in product marketing and theories of marketing in shaping our entry and marketing strategy. Our marketing will be duly informed by Porter’s Five Forces for shaping marketing strategy (Porter,1985,p.18). In regard to segmentation, the skin cream will target males and females who are above 30 years and are regular visitors to spas.

Section B

In this section, we provide a detailed analysis of the methodology used in determining the product cost estimate, selling price estimate, break-even point analysis and a 5 year financial projection.

The Standard cost card for each and every product is provided side by side in the appendix 2 below.

Product Cost estimate

Micro-Dermabrasion Cream

Variable Costs

Variable production Costs

Variable Selling Costs

Fixed Costs

Fixed Production Costs

Fixed Selling and Administrative Costs

Mineral Masque Soufflé

Variable Costs

Variable production Costs

Variable Selling Costs

Fixed Costs

Fixed Production Costs

Fixed Selling and Administrative Costs

See Appendix 2 for an in-depth analysis

Breakeven Point

In Cost Volume Profit (CVP) analysis, breakeven point is defined as the price of a given product/service (P) minus the variable cost per unit sold (VC).It denotes the contribution margin (Worm,1997).

The costing methods that is employed in our case is absorption costing method because we consider both the variable and fixed costs that are absorbed by the product. This cost accounting technique is also critical for the purposes of external reporting.

Five Year Budgeted Income Statement

The sales volume would need to be increased by 3% on a yearly basis since this is the first time that our products will be marketed and sold in the UK. Over the years the expenditure on advertising/marketing/development costs will be gradually decreased by 8% in order for the company to concentrate its resources on its key competencies.

The manufacturing process that will be involved in the production of both products will involve the use of two dedicated production lines housed in two separate facilities. These facilities will need to be moved to the UK within the first year of operation in order to solve logistical challenges ad tax issue.

Conclusion / recommendations

The company will mainly concentrate I n the production of product 1 due to its high rate of return on investment. The business is viable due to the fact that most individuals prefer natural and herbal products due to their environmental friendliness.

Section C

The business will have an impact on the environment due to the carbon fot print that will be produced at the manufacturing/production and transportation of the raw materials and finished products. We therefore have a solid sustainability policy that embodies all pillars of corporate social responsibility and triple bottom line reporting. We aim to strike a balance between sustainability and profitability by employing such a policy (Hohnen & Potts,2007,p.11).

A reflection

The process of writing this report has taught me several things on cost management accounting. I have also learned more on marketing and product launch in international locations. Certainly, my skills in formulating an internationalization strategy have improved as well as those for writing business reports. The elements I found more interesting are the ones involved with the cost volume profit analysis. The evaluation of the breakeven point was before this exercise a mystery. I however had very difficult time in the mathematical elements of the work since most of the accounting parts required the use of complex arithmetic. Overall, this process has added me more experience that will help me both in my personal and professional life.


Euromonitor International (2012). Skin Care in the United Kingdom. HYPERLINK “http://www.euromonitor.com/skin-care-in-the-united-kingdom/report”http://www.euromonitor.com/skin-care-in-the-united-kingdom/report

Hohnen,P., Pots,J (2007). Corporate Social Responsibility-An Implementation Guide for Business. International Institute for Sustainable Development. Available online at HYPERLINK “http://www.iisd.org/pdf/2007/csr_guide.pdf”http://www.iisd.org/pdf/2007/csr_guide.pdf

Porter,ME (1985).Competitive Advantage.New YorK;Free Press

Worm, M (1997) “Break-Even Analysis and the Commercial Loan Decision.” Journal of Lending and Credit Risk Management. November 1997

Appendix 1Competitor benchmarking/analysis

Suppliers Product 1 Product 2

EcoGenics, Inc Micro-Dermabrasion Cream Mineral Masque Soufflé

Proctor & Gamble Olay Regenerist Microdermabrasion and Peel Kit Pro-X Clear Acne Protocol

Avon ANEW CLINICAL Advanced Dermabrasion System Clearskin® Professional Acne Treatment System

Unilever Plc Fair and Lovely UNILEVER AVIANCE acne pro

Appendix 2Selling Price calculations/Standard Cost Card

Standard cost card per unit

Traditional Absorption Product 1 Product 2 Standard cost card per unit

Marginal costing Product 1 Product 2

Direct materials 7 8 Direct materials

Direct labor 1 2 Direct labour Direct expenses 1 1 Direct expenses Other variable costs 0.3 2.29 Other variable costs Fixed costs (per unit) 3.5 5 Total costs 12.80 18.29 Total variable costs Profit mark-up 12.20 6.71 Profit mark-up Selling price ₤25 ₤25 Selling price Appendix 3Workings to Support Budgeted Income Statement

Production costs –

Product 1 – units ______ £ Production costs –

Product 2 – units ____ £ Total Year 1

Direct Materials Direct Materials Direct labour Direct Labour Direct expenses Direct Expense Other Variable costs Other Variable costs Production costs Per unit ______ Production costs Per unit _____ Production costs of goods sold

Product 1 – units sold ______x £ £ Production costs of goods sold

Product 2 – units sold ____ x £ £ Total Year 1

Production costs of goods NOT sold

Product 1 – units sold ______x £ Production costs of goods NOT sold

Product 2 – units sold ____ x £

Appendix 5Budgeted Income Statement – Five year projection – using Marginal costing principles

Yr 1 Yr 2 Yr 3 Yr 4 Yr 5


Less Cost of Sales (Variable) Contribution Fixed Costs Budgeted Profit Appendix 3Break-even point

Appendix 4Net Present Value

Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5

Cost 25 25.7 28 32 34 35

Cash Flows (profits) (In MIllions) 25 26 29 38 40 42

Calculation or Discount factor 0.2 0.2 0.25 0.3 0.2 0.25

Present Value 24 26.3 28.4 36 36 38

Net Present Value 24 26 28 36 36 38