Evaluation

Cost calculations

To determine if a product is viable to bring onto the market, one has to find the total costs of the product using variables like the profit margin and break-even points that are calculated. The relevance of these calculations is also to see if the set limits of 150€ and 250€ are met.

In an efficient cost-analysis, information is available about fixed costs and variable costs. Fixed costs are the costs that the company makes and are not related to the quantity of products that are produced. The fixed costs per product does go down with an increase in the quantity produced. Variable costs are costs that are incurred with the production of a product. The assumed fixed costs are around 200 million euros. These are related to the fixed costs of the European division of Nespresso. The variable costs consist of material, processing, labour, packaging, and transport costs. Assumptions had to be made about the results of an economy of scale for the innovative materials used, like mycelium and chitin. Next to that, assumption had to be made about the processing costs of making the product. It was put at 50% of material costs. Labour contributes to roughly half of the variable costs.

The total cost price of the normal machine is around 100 euros, and the deluxe around 120. This shows that the machines can be produced for a price under their respective sales prices of 150 and 250 euros.

With these costs, key factors can be calculated that determine the viability of a product. This is done in an Excel file, which can be filled in with a few dozen of variables to make the projection of costs and sales as realistic as possible. The interactive excel file can be accessed here.

For the settings used by the team, the break even point of the Mycelio and Mycelio Deluxe machine are 1.6 million and 1 million respectively. The pods have the highest gross profit margin at 76%, followed by the deluxe (48%) and normal (46%) machine.