Marketing Math Assignment - Mktng
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Purdue University, Fort Wayne *
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30101
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Mathematics
Date
Feb 20, 2024
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docx
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2
Uploaded by DeanReindeer2194
William Kohrman
Discussion – Marketing Math 10S-1. Assume that you are in charge of pricing for a firm that produces pickles.
You have fixed costs of $3,500,000.
Variable costs are $0.55 per jar of pickles.
You are selling your product to retailers for $0.95.
You sell the pickles in cases of 24 jars per case.
Note that the pickle producer cannot sell pickles except in full jars and in full cases. Therefore, you need to be careful and round up when calculations result in a partial jar or a partial case. 1.
How many jars of pickles must you sell to break even? 8,750,000 units
2.
How much must you sell in dollars to break even? $8,321,500
3.
How many jars of pickles must you sell to break even plus make a profit of $1,000,000? 11,250,000 units
4.
Assume a retailer buys your product for $0.95. His business requires that he price products with a 30 percent markup on cost. Calculate his selling price. ~$1.24 per jar
5.
Assume you have an MSrP of $1.69 for the pickles. If a retailer has a required 35 percent retailer margin on all products he sells, what is the most he is willing to pay the producer for
the pickles? ~$1.25
A clothing retailer knows that to break even and make a profit, he needs to have a minimum retailer margin (also referred to as a contribution margin or gross margin) of at least 55 percent. If he is to sell a pair of shorts for the manufacturer’s suggested retail price of $49.99, what is the most he can pay the manufacturer for the shorts and maintain his margin?
ANSWER: $22.50 per pair of shorts
A salesperson is developing a quote for a quantity of disposable hospital gowns. His cost for each case of
gowns is $72.00. His firm requires that he have a 20 percent margin so he is using a markup on selling price calculation to price the gowns. What will his quote be per case of gowns if he uses a 20 percent markup on selling price? ANSWER: $86.40 per case
10S-2: Executives of Studio recordings Inc. produced the latest compact disc by the Starshine Sisters Band, titled Sunshine/Moonshine. The following cost information pertains to the CD. a. CD package $0.75/CD b. Songwriters’ royalties $0.45/CD c. Recording artists’ royalties $0.95/CD d. Advertising and promotion $1,350,000 e. Studio recording Inc.’s overhead $280,000 f. Selling price to the CD distributor $8.70
William Kohrman
Calculate the following: 1.
Contribution per CD unit
= $6.55
2.
Break-even volume in CD units and dollars
= 248,855 units & $2,165,038.50
3.
Net profit if 1 million CDs are sold = $6,534,961.50
4.
Necessary CD unit volume to achieve a $500,000 profit = 325,191 units
10S-3. A distributor of equipment and supplies for physician’s offices and other similar healthcare customers requires that their sales people negotiate with customers to get the best price possible. At the same time, the distributor management knows that to cover overhead costs such as salary, rent, and
utility bills plus provide a satisfactory level of profit, they need a margin of 45 percent. Therefore, the salespeople use a markup on selling price to calculate their quotes. If the company buys cases of disposable examination gowns for $288, what is the lowest price the salesperson can quote the customer? ANSWER: $417.60 per case
10S-4. “Green Stuff” is a regional chain of small restaurants. The Green Stuff menu includes only salads, all priced at $8.95, and beverages. Each restaurant serves an average of 800 salads a week at that price. The company wants to raise the price of their salads to $10.95 but is concerned that the price increase will lower sales volume and could actually lower total revenue for the stores. To determine whether they should raise salad prices, the company has tested the higher price of $10.95 in some of their stores.
The results of their study showed that when the price of the salads was increased, average store sales declined from 800 salads per week to 650. 1.
Calculate the price elasticity of demand for Green Stuff’s price increase experiment. PEoD = 1.03
2.
What conclusions can be drawn from the price increase experiment? This change in price would negatively affect the ultimate outcome, meaning the price is Elastic
3.
What would you recommend that Green Stuff do?
The company could elect to keep their prices the same, ensuring their volume remains at 800 or they could lower the price in smaller, likely more inelastic segments, in order to reach higher revenue.
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