Essay Coleman Asbestos Pads

611 Words Apr 14th, 2012 3 Pages
1. First I compared Asbestos Pads to CMI Pads in the Coleman Test:
$3 x 24 pads/set x 20 sets used = $1440
$1440.00 / 1 set CMI (6 Pads) = $240.00 Base pad retail
$50/set actually paid x 20 sets used = $1000
$1000/1 set CMI (6 Pads) = $166.67 retail paid

2. Added savings in efficiencies in feet driven per hour:
15,000’ required / 200’ per hour (CMI) = 75 Hours
15,000’ required / 150’ per hour (asbestos) = 100 Hours
25 labor hours saved x $280.00/hour = $7,000
$7,000 / 1 set (6 pads) = $1,166.67 savings in efficient drilling (33% efficiency)
$1,166.67 savings (33%) vs. 20% efficiency per Simpson = $707.68 savings

3. Added savings in less time spent changing the pads:
.33hr x 20 sets x $280 = $1,848.00
.067hr x 1 set x $280
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Profit impact to CMI ($176.89 x 17,547) - $1,914,803 = $1,189,085.83 1. The retail price Cumberland’s representatives should charge is: $1,179.24
2. Cumberland should charge $707.53 wholesale – since we’d be using construction oriented sales representatives. This takes into account the normal 40% margin that has been traditionally associated with markups on the asbestos pads, as well as our internal 50% contribution margin.
3. Cumberland could easily substantiate the costs to potential customers because one CMI pad is equal to roughly 393 asbestos pads (at $3.00/pad). The underlying value comes in the ease of use (the pads stay cooler), the health aspects (CMI pads are safer than asbestos), and the increased efficiencies related to foot per hour driving.
4. Cumberland’s CEO would be pleased to see that producing 17,547 pads (conservative 10% market share estimate) would generate a $1,189,085.83 profit impact to the company’s

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