Rohm Haas Case Analysis

Ave Selling Price per box Ave Manufact Cost per box Gross Margin

$163 $72 $91 P&L

Item Boxes Sold Revenue Manufacturing Cost Advertising Cost

YTD 74 $12,087 ($5,328) ($19,000)

Notes 74 boxes sold * $163/box 5 months * $3800/month 3 months of samples 2 packet samples per 200 customers (400 packets * $0.50/packet)

Samples

($200) ($12,441) 136 $22,249

# of Boxes to be sold to recover YTD loss: Sales Revenue required to recover YTD loss:

Yearly Cost Item Advertising Cost Samples SG&A $45,600 $800 $29,700 $76,100 833 $136,091 $220,500 Notes $19,000/5 months * 12 months/yr (200 samples/3 months) * (12 months/yr) Assume average of information given on Page 2 of case (6 sales people @ $60,000/yr used 33% of 25% of the time)

Boxes required to breakeven: Sales Target to breakeven: 1984 Sales Plan

$76,100 / $91/box 833 boxes * $163/box 1350

Typical small machine shop for a year Item Notes

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Rohm Haas Case Analysis No of gallons of metalworking fluid used in a year No of gallons of metalworking fluid concentrate sold by formulators per year Average cost of metal working fluid concentrate per gallon No of gallons of metal working fluid used in a year with MWX No of gallons of metalworking fluid concentrate sold by formulators per year when MWX is used No of gallons of metal working fluid used in a year with Tris Nitro No of gallons of metalworking fluid concentrate sold by formulators per year when Tris Nitro is used Disposal fee per gallon Cost when no biocide is used 14300 596 $5.68 7627 318 10400 (22 machines * 50 gallons * 52 weeks) / 7.5 weeks Assumes usage is extended by average of 2-5 weeks or 3.5 weeks (page 15) 7627 / 24 Dilution ratio = 1:24 (22 machines * 50 gallons * 52 weeks) / 6 weeks Assumes usage is extended by average of 1.5 weeks (page 3) (22 machines * 50 gallons * 52 weeks) / 4 weeks Dilution ratio = 1:24

Cost when Kathon MWX is used Average Annual Savings per shop with MWX

Cost when Tris Nitro is used Average Annual Savings per shop with Tris Nitro

10400 / 24 Dilution ratio = 1:24 433 Annual cost for a Small Machine Shop $1.36 $22,832 $3,384 + ($1.36/gal * 14300 gal) ($1.36/gal * 7627 gal) + ($0.05/gal * 7627 gal) + ($5.68/gal * 318 gal) Cost: (1 packet/37.5 gal) * ($2 / packet) Disposal Fee per yr = $1.36/gal * 7627 gal Total cost of MWX per yr = $0.05/gal * 7627 gal Cost of concentrate per yr = $5.68/gal * 318 gal $12,584 $10,248 Cost of MWX per yr = $406.76 Tris Nitro Cost $7.75 / lb 2 oz treats 25 gals Extends fluid life by 2 weeks (per page 3) Cost: [(2 oz / 25 gals) * (1 lb / 16 oz) * ($7.75 / 1 lb)] = $0.04/gal ($1.36/gal * 7627 gal) + ($0.05/gal * 7627 gal) + ($5.68/gal * 318 gal) Disposal Fee per yr = $1.36/gal * 9533 gal Total cost of Tris Nitro per yr = $0.04/gal * 9533 gal Cost of concentrate per yr = $5.68/gal * 397 gal $17,008 Cost of Tris Nitro per yr = $369.42 $5,824

Distributor Sales to Typical a Small Machine Shop

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Rohm Haas Case Analysis Sales of metalworking fluid concentrate by distributors @ $5.68/gallon Loss in concentrrate Sales when MWX is used Price of MWX to end user Annual Sales of MWX Total Sale when MWX is used

$3,384 $1,579 $2.00 $407 $2,212

596 gals * $5.68/gal 318 gal of concentrate sold instead of 596 gal Cost per packet

Profit from MWX sales % Gain in Revenue with MWX Loss in concentrate Sales whenTris Nitro is used Price of Tris Nitro to end user Annual Sales of Tris Nitro Total Sales when Tris Nitro is used Profit from sales of Tris Nitro % Gain in Revenue with Tris Nitro

$177 -35% $923 $7.75 $403 $2,864 $2,509 -15%

($2 / packet - $1.13 / packet)*(7627 gal / 37.5 gal) $1.13 = cost to Distributor 1 packet treats 37.5 gals diluted fluid Distibutors lose revenue when selling MWX 397 gal of concentrate sold instead of 596 gal Cost: [(2 oz / 25 gals) * (1 lb / 16 oz) * ($7.75 / 1 lb)] = $0.04/gal

Buy Tris Nitro @ $4/lb, sell @ $7.75/lb Distibutors lose revenue when selling Tris Nitro

Individual Systems in the U.S. Loss per Machine Total Loss in U.S. Market by using MWX Total U.S. Supply Houses (14327) & Machine Tool Shops (3654)

Distributor Sales to total U.S. Market 1,701,000 $71.79 1701000 * $71.79 $24,422,580 Assume 20% capture rate for MWX 17,981

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Rohm Haas Case Analysis

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Rohm Haas Case Analysis

406.755556

$403.00

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Rohm Haas Case Analysis

$1,579.36

$1,586

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Products Tris nitro Dowicil 75 Khaton MWX

Marignal Cost Pound $ $ 4.00 $

Distributors Price Pound 4.00 $ 2.40 $ 6.00 $

Retail Price Pound 7.80 10.00 16.00

Margin Calclulation - Biocide treating 50 gallons Products Biocide lbs.50 Gallons End User-Price/lbs Tris nitro $0.25 Dowicil 75 $0.25 Khaton MWX $0.13 Total Price 50 Gallons $1.94 $2.50 $2.00

$7.75 $10.00 $16.00

Margin Calclulation - Biocide used Per Month Products Biocide lbs Gallon/Mo End User-Price/lbs Tris nitro $2.50 Dowicil 75 $0.50 Khaton MWX $0.30 Total Price P/Mo $7.80 $10.00 $16.00 $19.40 $5.00 $4.00

Retailer Margin $ 3.80 $ 7.60 $ 10.00

Margin 50 Gallons $0.94 $1.90 $1.25

Margin Month $9.40 $3.80 $5.00