Answers Chapter 11 - Chapter 11: Pricing Strategies Study...

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Chapter 11: Pricing Strategies Study Questions 1. Do Problems 1 and 2 under “Marketing by the Numbers” on page 333. a. Problem 1 a.i. Old Contribution per oz. = Contribution / oz. = \$3.00 * 30% / 12 = \$0.075 a.ii. For the 10 oz. bag we will have to approximate since we don’t know the cost of the bag itself (which doesn’t change). We will make the simplifying assumption that all variable costs are associated with the chips in the bag: a.ii.1. The variable costs associated with the 10 oz. bag are 10/12 * \$300 * (100% – 30%) = \$1.75. So the new contribution is \$3.00 - \$1.75 = \$1.25 a.ii.2. New Contribution per oz. = \$1.25 / 10 oz. = \$0.125 a.ii.2.a. in reality, the cost of the bag may be 25% – 50% of the bag which will reduce this contribution significantly. The true contribution is probably closer to \$0.10 per oz. b. Problem 2 b.i. The answer to this is the new contribution plus the old cost b.ii. = 12 oz. * \$0.125 + \$3.00 * 70% = \$3.60 b.iii. For the estimate which estimates the price of the bag:

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Answers Chapter 11 - Chapter 11: Pricing Strategies Study...

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