Margin Analysis - Pharmalodiagnosticon

Pharmalodiagnosticon, an up and coming pharmaceutical company, is thinking of introducing a new product, Sweet Relief, into the crowded OTC market for pain relievers. Its average retail price is set to be about ten dollars for a bottle of 250 caplets.

The retailer's margin is 30%. It will cost Pharmalodiagnosticon $1 a bottle for the key ingredient (aspirin), another $0.50 a bottle for the sugar coating, and another $0.50 for packaging. Coincidentally, another drug company, Schmerck, is unveiling a similar product, Ow-B-Gone. Its average retail price is set to be %10 less than the average retail price of Sweet Relief for the same quantity.

The retailers margin is $3.25. It will cost Schmerck $1.50 a bottle for the main ingredient (Papavera somniferum), $.75 a bottle for making into gel-cap form, and another $.60 for packaging.";