Bagging Co.

Bagging Co. makes rolls of grease-proof paper. The production of this paper is
unique in that there are many mechanical differences in the production process
compared to other paper production lines. In particular, these machines require a
larger upfront capital expenditure. Bagging Co. sells this grease-proof paper to
bag converters. The bag converters add glue and produce the actual bag of
popcorn, then turn around and sell it to major packaged food companies for
resale. Recently, the R&D dept. at Bagging Co. discovered a means to reduce
grease soakage by 10x. This is achievable by a relatively simple modification to
the current equipment at a negligible cost.
Additional info to be given:
Bag converters like the product. They currently create double-ply popcorn bags
and now would be able to create single-ply.
1. Bag converters current cost breakdown
- $.30 / 2 sheets
- $.10 / receptor (film applied to bag)
- $.05 / popcorn - $.05 / other manufacturing costs
- $.50 TOTAL COST
2. Client cost breakdown- $.10 / sheet (1/2 FC, 1/2 VC)

Should Bagging Co. make the new paper? Where might the value be in this
product and where would there be more value? What are other applications /
markets for this new technology?
What is clients profit margin without technology and how should the client price
a sheet of the new grease-resistant paper?