pricing homework

# pricing homework - MKTG 2201 INTRODUCTION TO MARKETING...

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MKTG 2201- INTRODUCTION TO MARKETING Pricing Problem Assignment Qi Sun

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1. a. Contribution per unit = price – variable cost = \$12 – \$6 = \$6 b. The breakeven revenue is \$60,000. The breakeven quantity is 5,000 units. c. Sales = \$12 × 10,000 = \$120,000 Total Cost = Variable Cost + Fixed Cost = \$6 × 10,000 + \$30,000 = \$90,000 Profit = Sales – Total Cost = \$30,000 Markup on sales price = Profit / Sales = \$30,000 / \$120,000 = 25% Markup on total cost = Profit / Total cost = \$30,000 / \$90,000 = 33.33% d. e. Sales = \$15 × 8,000 = \$120,000 Total Cost = Variable Cost + Fixed Cost = \$6 × 8,000 + \$30,000 = \$78,000 Profit = Sales – Total Cost = \$42,000 Markup on sales price = Profit / Sales = \$42,000 / \$120,000 = 35% Markup on total cost = Profit / Total cost = \$42,000 / \$78,000 = 53.85% f. Original Profit = \$30,000 Original Profit per unit = \$30,000 / 10,000 = \$3 New Profit = \$42,000 New Profit per unit = \$42,000 / 8,000 = \$5.25 It is better off for the company to raise the price, since their profit per unit sold has increased. 2. a. Price = CM + VC = \$10 Sales = Price × Quantity = \$10 × 10,000 = \$100,000 Total Cost = VC + FC = \$6 × 10,000 + \$10,000 = \$70,000 Profit = Sales Total Cost = \$30,000 Markup on sales price = Profit / Sales = \$30,000 / \$100,000 = 30% Markup on total cost = Profit / Total cost = \$30,000 / \$70,000 = 42.86% b. Price is dropped by \$2.
So, the new quantity is 14,000 units. c. New Price = \$10 \$2 = \$8 New Sales = New Price × New Quantity = \$8 × 14,000 = \$112,000 New Total Cost = VC + FC = \$6 × 14,000 + \$10,000 = \$94,000 New Profit = New Sales New Total Cost = \$13,000 New Markup on sales price = Profit / Sales = \$13,000 / \$112,000 = 11.61% New Markup on total cost = Profit / Total cost = \$13,000 / \$94,000 = 13.83%

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## This note was uploaded on 01/14/2012 for the course MKTG 2201 taught by Professor Jm during the Fall '10 term at Northeastern.

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pricing homework - MKTG 2201 INTRODUCTION TO MARKETING...

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