BUSN 225 â Principles
of Marketing
Chapter 18 Pricing
Problems
1.
Steve developed a Hum-Dinger and believes he can
sell them for $8.00 per unit. His Fixed Costs are $25,000 and his Variable
Costs are $3.00 per unit. He estimates his Total Cost per unit is $5.00 and his
Year 1 Gross Profit is projected at $45,000. How many Hum-Dingers must Steve
sell to break-even?
25000/ (8-3) = $5000 break-even point.
5000/8= 625
2.
What is Steveâs break-even Sales Revenue?
3.
Mark Cuban told Steve to raise his selling price
to $13.00 per unit. With all other financials the same, calculate the new
break-even amount in units.
4.
Jos A Banks is charging $300 for a manâs suit
after getting it from their wholesaler for $150. What is the retailerâs markup
percentage?
5.
It costs the producer of a coffee maker $44 to make
each one. The producer charges wholesale distributors $55 for each coffee maker
purchased. The producerâs markup in dollars is ________, and in percentage
terms, is ________.
6.
In 2010, P&G slashed prices on many of its
products. The price cuts come at a cost, however, and sales must increase considerably
just to break even. P&Gâs average contribution margin before the price cuts
was 20 percent. Calculate the new contribution margin (Price â VC) if prices
are reduced 10 percent. (Hint: Assume the price = $1.00 and work the problem.)
7.
A producer distributed its riding lawn mowers
through wholesalers and retailers. The retail price is $800 and the
manufacturing cost is $312. The retail markup is 35% and the wholesale markup
is 20%. What is the cost to the wholesaler? To the retailer? What percent
markup did the producer take?
8.
If the total fixed costs are $200,000 and total
variable costs are $100,000 at an output of 20,000 units, what are the probable
total fixed costs and total variable costs at output of 10,000? What are the
average fixed costs, average variable costs and average total costs at these
output levels?