Re: Costs of Products

Memorandum

To: Supervisor

From: Lee

Re: Costs of Products

Dear Supervisor,

This memo is in regards to the costs of products of our company. I am employed by a firm that produces tangible products. These products are then sold to a consuming populace this is unaffected by place, income, sex, race, age or any environmental concerns. These products are acquired and used across the spectrum of consumers. In this memo I will identify the three types of costs when quality considerations are made. Next, I will explain each of these types of costs using examples. Lastly, I will evaluate the three types of costs considering the trade-offs within manufacturing a product and/or producing a service.

The product of that this company produces that I am identifying is water in biodegradable containers. The three types of costs that must be factored in when considering the quality of the product are: the quality of the water, the containers and their environmental sustainability and the size of the product. I suggest that this product should be offered in three different sizes in order to meet the requirements for a wide spectrum of cost pricing that will accommodate our clientele. Just as is the same with coffee at Starbucks as an example, the small version of the water containers would be at the most minimum cost. The medium size would be at a mid-price, therefore allowing for the large size of the drinkable water container to be at the highest cost. I will suggest some prices below based on a model of pricing criteria from a company such as Starbucks as an example.

The small size water container would be priced at $2.00. This would allow for 200 grams of water, making it cost effective for the customers to be paying $.10 per gram of water in the container. This is fair.

The medium size of water container would be priced at $4.00. This would allow for 400 grams of water, making it cost effective for the customers to be paying again $.10 per gram of water in the container. This is fair.

To make things even more fair and as an incentive for the consumer to purchase the largest bottle of water, the large size of the water container would be priced at $6.99. This would allow for 800 grams of water, making it excessively cost effective for the customers to be paying even less for the largest size at $.087 per gram of water in the container. This value added incentive in the pricing for the drinkable water containers will encourage more people who are looking for value to purchase the larger bottle of water.

If you have any questions I welcome them dear Supervisor, as well as your comments.