Problem Set – An Appliance Retailer Purchased A Small Vacuum

Problem Set –. An appliance retailer purchased a small vacuum cl

Problem Set –. An appliance retailer purchased a small vacuum cleaner for $98.99. He plans to take a 45% markup. What will the selling price be? (Value 5 pts)

2. If a retailer sells a coat for $149.99. What was his markup if he bought the coat for $86.00. (Value 9 pts) Markup in actual dollars ________ Express markup as a % of cost _________ Express markup as a % of selling price ________

3. The Smith Company sells beautiful water fountains through wholesalers and retailers. The retail selling price is $1400.00, and the manufacturing cost to the company is $535.00. The retail markup was 38 percent and wholesale markup was 25 percent. (Value 9 pts) A. What was the cost to the wholesaler?__________ B. What was the cost to the retailer? ____________ C. What percentage markup did the producer make?__________

4. The Pointer Appliance Company is investigating the addition of a new and improved pulsating blender to its line of consumer appliances. The product chops, grinds, grates, and blends smoothies twice as fast as all other blenders on the market. It has a 10-year warranty on the motor and offers a replacement 5-cup glass blender cup for $10.99. The blender is going to require additional expenditures for the production line on the part of the Pointer Company. Management wants to determine what to price the blender at. The total fixed cost associated with manufacturing the blenders is $525,000. The variable cost is $17.99 per unit. Given the costs for adding the blender, management is considering selling the blender at one of these prices: $25.99, $34.99, and $49.99. Calculate the breakeven point in units at each of the selling prices: $25.99, $34.99, and $49.99 and show the calculations. Through your research, you know that this is a tough competitive market with many competitors. Most competitors have between 2-8% of the market and the market appears to be growing at a 5% rate per year. The total market for blenders of this type was 1,500,000 units last year. Given that the market leader is selling its blender for $39.99, which price would you recommend and why? (Value 15 pts)

5. Yoplait has a new line of Greek yogurt in a 9 oz size. The Marketing Managers plan to test market the product in one small market for three weeks. They have calculated the cost and projected sales for each of the different flavors: Plain cost is $0.55 each with a projected sales of 15,000 units, Strawberry cost per unit is $0.60 with a projected sales of 15,000 units, Blueberry cost is $0.68 per unit with a projected sales of 11,000 units. Each yogurt product will retail at the same price. Using the average cost pricing and a 45% markup, what will Yoplait price these products at the retail level? ______________ 10 pts

6. MyAppliance+ is adding a new wine cooler to its appliance product line. To implement the new cooler, it will have a fixed cost of $250,000, but the selling price is $150.00 with a variable cost of $86.99. MyAppliance+ wants to make at least $50,000 of profit in the first year with this new product. How many wine coolers does the company have to sell to reach this profit goal? ___________________ 5 pts Show your calculations for each problem. If I do not see the calculations, then I will not give credit. These can be typed on this form. Please complete and submit to the assignment in the drop box. Good Luck!!

Paper For Above instruction

This assignment involves calculating pricing strategies, markup, breakeven points, and market considerations for various products in a retail context. The goal is to demonstrate understanding of markup calculations, profit planning, and market analysis decisions essential for effective pricing and sales strategies in retail and manufacturing settings.

Question 1: Calculating Selling Price with Markup

The first problem requires determining the selling price of a vacuum cleaner purchased at $98.99 with a planned 45% markup. The formula for the selling price (SP) based on cost (C) and markup percentage (M%) is:

SP = C + (C * M%)

Converting 45% to decimal form, 0.45, the calculation becomes:

SP = $98.99 + ($98.99 * 0.45) = $98.99 + $44.55 = $143.54

Therefore, the planned selling price of the vacuum cleaner is approximately $143.54.

Question 2: Markup Calculation on a Coat

Given a selling price of $149.99 and a cost of $86.00, the markup in dollars is:

Markup = Selling Price - Cost = $149.99 - $86.00 = $63.99

Expressed as a percentage of cost:

Markup % of cost = (Markup / Cost) 100 = ($63.99 / $86.00) 100 ≈ 74.4%

Expressed as a percentage of selling price:

Markup % of selling price = (Markup / Selling Price) 100 = ($63.99 / $149.99) 100 ≈ 42.7%

This indicates a significant markup both in dollar and percentage terms, reflecting retail pricing strategies.

Question 3: Cost Analysis for Water Fountains Paper

The retail sale price is $1,400, with a retail markup of 38%. To find the wholesale and production costs, the following calculations are used:

Retail cost to the producer (cost to producer) = Manufacturing cost = $535.00.

The retail markup being 38% implies:

Retail selling price = Cost to retailer / (1 - Retail markup)

So, the cost to the retailer is:

Cost to retailer = Retail price / (1 + Retail markup) = $1400 / 1.38 ≈ $1014.49

Similarly, the cost to the wholesaler can be calculated using the wholesale markup of 25%. The wholesale price (cost to wholesaler) is:

Wholesale price = Retail price / (1 + Wholesale markup) = $1400 / 1.25 = $1120.00

Since the wholesale cost to the wholesaler is the wholesale price, the cost to the wholesaler is $1120.00. The markup percentage earned by the producer can be calculated as:

Producer markup = (Retail price - Production cost) / Production cost 100 = ($1400 - $535) / $535 100 ≈ 161.68%

Question 4: Breakeven Analysis and Market Pricing

The breakeven point in units is calculated as:

Break-even units = Fixed costs / (Selling price per unit - Variable cost per unit)

For each selling price:

  • $25.99:

Break-even units = 525,000 / (25.99 - 17.99) = 525,000 / 8 ≈ 65,625 units

  • $34.99:

Break-even units = 525,000 / (34.99 - 17.99) = 525,000 / 17 ≈ 30,882 units

  • $49.99:

Break-even units = 525,000 / (49.99 - 17.99) = 525,000 / 32 ≈ 16,406 units

Considering the market size of 1,500,000 units and the market growth, the price recommendation depends on competitiveness. At $49.99, the company has the lowest breakeven units and can compete better based on the profit margin, but market trends and competitor prices should be considered. The market leader's price at $39.99 suggests a competitive position which might justify selecting a price close to $39.99 to maximize market share while ensuring profitability.

Question 5: Pricing Strategy for Greek Yogurt

Using average cost pricing with a 45% markup, first calculate the average cost per unit:

Average cost = (0.55 15,000 + 0.60 15,000 + 0.68 * 11,000) / (15,000 + 15,000 + 11,000) = (8,250 + 9,000 + 7,480) / 41,000 ≈ 24,730 / 41,000 ≈ $0.604

Applying a 45% markup:

Price = Cost + (Cost 0.45) = $0.604 + ($0.604 0.45) ≈ $0.604 + $0.272 ≈ $0.876

Rounded to typical retail pricing, Yoplait might set the retail price at approximately $0.88 per unit.

Question 6: Profit and Sales Volume Calculation for Wine Cooler

Fixed costs = $250,000, desired profit = $50,000, and unit profit is:

Profit per unit = Selling price - Variable cost = $150 - $86.99 = $63.01

Total required profit = Fixed costs + desired profit = $250,000 + $50,000 = $300,000

Number of units needed to be sold to meet profit goal:

Units = Total profit / Profit per unit = $300,000 / $63.01 ≈ 4,757 units

Therefore, approximately 4,757 wine coolers must be sold to reach the profit goal.

This analysis illustrates the importance of understanding fixed and variable costs, profit margins, and market sales forecasts when introducing new products.

Conclusion

These calculations demonstrate the critical financial principles guiding retail pricing, cost analysis, breakeven points, and strategic market positioning. Accurate cost calculations and market considerations are essential for retailers and manufacturers to set competitive prices and achieve profitability in dynamic markets.

References

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