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How many juicers do they need to sell to reach this profit goal?

by | Nov 12, 2022 | Marketing | 0 comments

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Pricing Problem Set – 2022 Fall
Instructions: Before starting, review the definitions of markup, average-cost pricing, break-even point (BEP), fixed vs. variable costs and fixed-cost contribution per unit in Chapter 18. Remember that markup is stated as a % of the final selling price (not a % of the cost). See the formula in Appendix B under Markups to calculate the answers. You must show how you calculated the answers for each problem. If you do not show your calculations, you will not get credit. Upload your submission as a Word, Text, Excel, JPG, PDF or other format. Handwritten is acceptable.
Question 1: A pet store purchases small wire kennels from a wholesaler for $22.50 each. The retailer wants to take a 40% markup.
What will be the final retail selling price to customers? ____________
What is the markup in dollars? ____________
Question 2: A party supply retail store purchased 54” x 108” reusable plaid table covers from a wholesaler for $3.95 each. The store manager plans to take a 55% markup.
What will be the final retail selling price to customers? ____________
Question 3: US-based CamTech has been making solar-powered security video cameras for the industrial market for many years. The company is considering making a solar-powered home security camera for exterior use that is compatible with Alexa and Google Assistant. Popular cameras with similar features typically retail for $95-$150 each. To differentiate, they plan to offer a camera that can be pivoted and repositioned remotely from a smart phone app, assuming customers may be willing to pay more. To manufacture the camera will require $490,000 in fixed costs, and the variable cost per unit will be $65.00 (for parts, materials, labor). Management wants to determine the price it should charge to retailer.
What is the break-even point (BEP) in units at each of these three prices to retailers?
BEP units at $85.00 number of units:
BEP units at $100.00 number of units:
BEP units at $110.00 number of units:
If you were their marketing manager, which price would you choose and why? __________
Question 4: Advanced Home is adding a new juicer to its home appliance product mix. To implement the new juicer, the firm has a fixed cost of $250,000, and the selling price direct to consumers will be $89.99 with a variable cost of $55.00 per unit. They want to make at least $150,000 in profit the first year with this new product.
How many juicers do they need to sell to reach this profit goal? _____________
Question 5: VitaHealth plans to test market a new line of 2-oz gluten-free protein bars in three flavors. They have calculated the cost and projected sales for each. The chocolate cost per unit is .77 with projected sales of 18,000 units. The peanut cost per unit is .83 with projected sales of 21,000 units. The vanilla cost per unit is .72 with projected sales of 24,000 units. Each bar will retail at the same price.
Using the average-cost pricing method for the three flavors and a 55% markup, what will the retail price be to customers? _______________

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