PricingProbFall09_Solution

PricingProbFall09_Solution - BUSI 107 Fall 2009 Solutions...

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BUSI 107 Fall 2009 Solutions to Pricing Problem Set (1) (a) Set up the margin structure to find the manufacturer’s selling price: $11.00 retail price 3.85 35% retail markup 7.15 wholesale price .86 12% wholesale markup $6.29 manufacturer’s selling price Variable Costs : $2.75 variable manufacturing costs .85 misc. and shipping .63 sales commission (10% of manufacturer’s selling price) $4.23 Unit Contribution = Manufacturer’s Selling Price – Variable Costs = $6.29-$4.23 = $2.06 (b) Fixed Costs , Scenario 1: $3,750,000 manufacturing 90,000 salary 900,000 advertising and promotional budget $4,740,000 Fixed Costs, Scenario 2: $5,090,000 Fixed Costs, Scenario 3: $5,340,000 Break-even Units = Fixed Costs Unit Contribution Scenario 1: $4,740,000 = 2,300,971 $2.06/unit Break-even Market Share = Break-even Units Market Size = 2,300,971 = 5.1% 45,000,000 Break-even units and share, Scenario 2: 2,470,874 5.5% Break-even units and share, Scenario 3: 2,592,233 5.8%
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(c) Profit Impact = (Unit Volume)(Unit Contribution) – Fixed Costs
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PricingProbFall09_Solution - BUSI 107 Fall 2009 Solutions...

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