Answered: Marketing by the Numbers: Pricey Sheets…

Marketing

20th Edition

ISBN:9780357033791

Author:Pride, William M

Publisher:Pride, William M

Chapter18: Personal Selling And Sales Promotion

Section: Chapter Questions

Problem 14DRQ

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Part I: Given the cost per king-size sheet set above, and assuming the manufacturer has total fixed costs of $500,000 and estimates first year sales will be 50,000 sets, determine the price to consumers if the company desires a 40 percent margin on sales. Part II: If the company decides to sell through retailers instead of directly to consumers online, to maintain the consumer price you calculated in the previous question, at what price must it sell the product to a wholesaler who then sells it to retailers? Assume wholesalers desire a 10 percent margin and retailers get a 20 percent margin, both based on their respective selling prices.

Transcribed Image Text:Marketing by the Numbers: Pricey Sheets Many luxury sheets cost less than $200 to make but sell for more than $500 in retail stores. The creators of a new brand of luxury linens, called Boll & Branch, have entered this market and are determining the price at which to sell their sheets directly to consumers online. They want to price their sheets lower than most brands but still want to earn an adequate margin on sales. The sheets come in a luxurious box that can be reused. The Boll & Branch brand pursues fair trade practices when sourcing its high-grade long-staple organic cotton from India. Given the cost information below, answer the following questions. Raw Cotton Spinning/Weaving/Dyeing Cut/Sew/Finishing Material Transportation Factory Fee Inspection and Import Fees Ocean Freight/Insurance Warehousing Packaging Promotion Customer Shipping Formulas to help you: Unit cost variable cost + (fixed costs/unit sales) Markup price = unit cost / (1 - desired margin%) Cost/King-size Set $28.00 $12.00 $10.00 $3.00 $16.00 $14.00 $5.00 $ 8.00 $15.00 $30.00 $15.00

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