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THE DULUX LAMP

Dr. Badari Narayana T K Mr. Mohan Murari Mr. Sushanta Ganguly Mr. Ajay Gupta Ajit bisoi Tarakeshwar Das (10) (19) (33) (37) (04) (49)

GLOBAL ILLUMINATING (GI)

GINA has come across a new product opportunity in light source i.e. CFL Lamps CFL lamps has many advantages compared to incandescent bulbs CFL Lamps lasts ten times as long and consumes 1/5th the energy In order to test the new product, GINA convinced FLS (Farnham Lighting Service) to select & propose a small customer FLS proposed the Stardust Casino to convert from incandescent to CFL bulbs
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Given Data - Stardust Casino

15000 Incandescent fixtures (50 & 100 watts bulbs) 2000 Fluorescent fixtures(25 watts bulbs) Timings 24 x 365 Hours per year Light source requirement - 24 x 365 Hours per year Standard Practice Followed Group re-lamping at 80% of the bulbs expected life Frequency of re-lamping: 8 times Incandescent bulbs & 1.4 times for Fluorescent Bulbs Average labor rate: $20 per hour Average of 5 minutes to change each bulb, and equipment rental at about $300/day, Estimated Cost of time lost in re-lamping 1,00,000 (Each Year)
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CONTEXT OF THE CASE

The retail selling price is yet to be determined

!!
18-watt CFL bulb provides comparable light to a 100-watt incandescent bulb

9-watt CFL bulb provides comparable light to a 25 & 50 -watt incandescent bulb
CFL Bulb lasts 10,000 hours, versus incandescent bulb about 1,000 hours The normal incandescent 100-watt bulb costs about 18 cents to manufacture and sells retail for about $1.20 The CFL 18-watt bulb can cost up to $3-$4 to manufacture The ten times life and 80% energy savings are important factors in determining the price for CFL Bulbs

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CALCULATION OF EVC TO THE CASINO

POWER COST IN TRADITIONAL SYSTEM

nos room bulbs(100 watt) 9000

total WH

kwh

cost

hall bulbs(50 watts)

casino bulbs(100 watts) casino bulbs(25 watts)

1000
5000 2000

438000000
4380000000 438000000

438000

61320

4380000 613200 438000 61320 735840

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CALCULATION OF EVC TO THE CASINO

POWER COST IN NEW SYSTEM bulb watt 9 18 9

area hall bulbs casino bulbs casino bulbs

nos 1000 5000 2000

total watt HR KWH 78840000 78840

Cost 11037.6 110376 22075.2 143488.8

788400000 788400 157680000 157680

100 watt to be replaced by 18 watt 50 & 25 watt bulbs to be replaced by 9 watt

Power cost saving by implementing new system=592351.2

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CALCULATION OF EVC TO THE CASINO

Saving on labor cost

Total total Labor total bulbs total hrs days Cost
48000 4000

nos

changing freq/yr 8

incandecent bulb to be changed 6000 florocent bulbs to be changed 2000

1.4

2800
50800

233.3333
4233.333 76 97280

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Calculation

power cost saving calculation

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Annual Installment for Loan Payment

Retrofit Cost Calculation Quantity Cost/Unit Wall Fixture Overhead Fixture 3000 5000 30 Total Cost 90000 Effective Gross Margin Cost 40% 40% 126000 245000

35 175000

Total Retrofit Cost

371000

Annual Installment for Loan Payment= $ 54,471.79

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Total Savings Achieved per CFL Bulb

Total saving on 9 watt bulb

59.87198849

Total saving on 18 watt bulb

130.5943885

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Pricing Strategy
Factors Considered for Pricing Strategy Cost of Manufacturing CFL Bulb - $ 3 to 4 Total Savings achieved Total saving on 9 watt bulb $ 60 Total saving on 18 watt bulb - $ 130.5943885 Hence we can consider 15% discount on 9 watt bulb - $ 64 18 watt bulb - $ 134

Pricing Strategy Calculation

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Final Price arrived

For 9 Watt Bulb we can price at $ 54.4 For 18 Watt Bulb we can price at $ 114

We can even price it at a lower slab as we are arriving at the final pricing strategy by cost of saving as the manufacturing cost is a small amount

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