1. Suppose you are the producer of a product with a manufacturer's suggested retail price of $1000. Assume that this is the actual retail price. In your distribution channel, the retailer typically demands a margin of 30% off the retail price it charges. The wholesaler demands a 20% margin on the price at which he sells to the retailer. As the manufacturer, your cost of goods sold is $400. a. What price does the retailer pay? b. What price does the wholesaler pay? с. What is the manufacturer's contribution in dollars per unit? What is the manufacturer's contribution margin?

1. Suppose you are the producer of a product with a manufacturer's suggested retail price of $1000. Assume that this is the actual retail price. In your distribution channel, the retailer typically demands a margin of 30% off the retail price it charges. The wholesaler demands a 20% margin on the price at which he sells to the retailer. As the manufacturer, your cost of goods sold is $400. a. What price does the retailer pay? b. What price does the wholesaler pay? с. What is the manufacturer's contribution in dollars per unit? What is the manufacturer's contribution margin?

Principles Of Marketing

17th Edition

ISBN:9780134492513

Author:Kotler, Philip, Armstrong, Gary (gary M.)

Publisher:Kotler, Philip, Armstrong, Gary (gary M.)

Chapter1: Marketing: Creating Customer Value And Engagement

Section: Chapter Questions

Problem 1.1DQ

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Concept explainers

Buying

Buying is the activity that involves acquiring something of value in exchange for an asset. The acquisition could be goods or/and services. During the buying process, the exchange of value takes place between two or more parties. For instance, if you are offered a present from your relative, it can not be termed “buying” as value exchange is only from one side. Therefore, any form of gifting is not considered buying. The most common medium of exchange to facilitate buying is currency.

Question

1. Suppose you are the producer of a product with a
manufacturer's suggested retail price of $1000. Assume that
this is the actual retail price. In your distribution channel, the
retailer typically demands a margin of 30% off the retail price
it charges. The wholesaler demands a 20% margin on the
price at which he sells to the retailer. As the manufacturer,
your cost of goods sold is $400.
a. What price does the retailer pay?
b. What price does the wholesaler pay?
c.
What is the manufacturer's contribution in dollars per
unit?
c. What is the manufacturer's contribution margin?
2. Suppose your fixed costs include $200,000 in advertising and
$300,000 in overhead?
a. What is the manufacturer's breakeven in terms of units?
b. What is the manufacturer's breakeven in terms of dollars?

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