Bouvet Springs Inc Case Solution

1. Would you approve the move to unlabeled water? Why?

The suggestion of Ennis Green to move to private label water seems to be a highly feasible option for the company, given the fact that it will reduce the operating expenses of the company. The freight costs that had been hurting the company pretty badly will be reduced to zero. If, the private label water is introduced because the purchaser will incur those costs as well as the advertising costs. The contribution margin would be $1.75 per case, and sales are expected to rise considerably. Private label water will be sold to hotels and grocery stores and the high demand will be met easily because of the 3 million per annum production capacity of the bottling plant. 

Sarah Hopkins belief that the company would incur higher losses than before are not far from reality owing to the fact that the company’s real sales figures and profits were off by more than half of the forecasted amount.