Skip to content
MarkSchemeMarkScheme
Sign up — no card

9609 · 8.1.2

Product development — practice questions

Practice and worked examples for 9609 Product development. Short previews only — attempt the full question in MarkScheme against the official scheme.

Worked example 1

Snack firm spent $2m developing a healthy crisps line. Test marketing in two cities showed 60% trial but only 15% repeat purchase. Recommend whether to launch nationally.

Show solution outline

Positive: High trial — promotion and packaging work.

Negative: Low repeat purchase — ** taste or price** problem; 60% trial wasted without loyalty.

Financial risk: National launch marketing $5m+ on weak retention → loss.

Recommendation: Do not launch yet — reformulate or reprice; second test market. Sunk cost fallacy — ignore $2m when deciding forward.

Worked example 2

TechNova has developed a new smart home device. The R&D and initial marketing setup costs (fixed costs) are $750,000. The variable cost to produce each device is $25. The planned selling price is $75 per unit. The marketing department forecasts first-year sales of 20,000 units. Calculate the break-even point and advise whether the project is financially viable in its first year based on these figures.

Show solution outline

Step 1: Calculate Contribution per Unit Contribution = Selling Price - Variable Cost Contribution = 75−75 - 25 = $50 per unit

Step 2: Calculate Break-Even Point (BEP) BEP (units) = Fixed Costs / Contribution per unit BEP = 750,000/750,000 / 50 = 15,000 units

Step 3: Evaluate against Sales Forecast The break-even point is 15,000 units. The sales forecast is 20,000 units. Margin of Safety = Forecast Sales - Break-Even Point Margin of Safety = 20,000 - 15,000 = 5,000 units.

Step 4: Calculate Projected Profit and Advise Projected Profit = (Total Contribution) - Fixed Costs Projected Profit = (20,000 units * 50)−50) - 750,000 Projected Profit = 1,000,000−1,000,000 - 750,000 = 250,000250,000

Advice: The project is financially viable. It is forecast to break even after selling 15,000 units and achieve a profit of $250,000 in the first year, with a margin of safety of 5,000 units. The launch should proceed, assuming the sales forecast is reliable.

Mark a 9609 question on this topicFull lessonOpen in course studio