Note from teacher: Do questions 1-4, you can skip 5-7, and then finish with 8, 9 and 10. Also, the business that all of these questions are based off of is a coffee shop.
Marketing 2 | Graded Assignment | Pricing Name: Sophia Neumann Marketing 2 | Graded Assignment | Pricing Date: © 2019 K12 Inc. All rights reserved.Page 1 of 1 Copying or distributing without K12’s written consent is prohibited. Graded Assignment Pricing Total score: ____ of 60 points Focus Enter the answers to the questions. Use complete sentences unless the question says otherwise. Instructions For this assignment, choose a type of product or service that you could imagine yourself selling. You will be calculating the proposed cost and price of this product or service. 1. Describe the type of product or service you would offer. (2–3 sentences; 6.0 points) 2. List the variable costs for your company's product or service, with a cost estimate for each. (4–6 items; 6.0 points) For example, the variable costs for a company that makes T-shirts and ships them to customers might look like this: · T-shirts: $6 each · Paint: about $1.25 per shirt · Labor: about $3 per shirt (workers earn $9 per hour and can make three shirts per hour, or because workers are paid by the shirt) · Shipping: $4 per shirt 3. Add the variable costs per unit to get the total cost of goods or services sold per unit. (3.0 points) TIP: Your minimum selling price will have to be higher than this number. Next, you'll calculate fixed costs to find out how much higher it needs to be. 4. List the fixed costs for your company, with estimates for how much each cost will be per month. If some of your fixed costs are one-time purchases, such as a computer or equipment, divide the total cost of the purchase by the number of months you expect to use the purchase. (4–6 items; 6.0 points) For example, the fixed costs for the T-shirt company might look like this: · Rent: $300 per month · Utilities (water and electricity): $50 per month · Telephone and Internet service: $50 per month · Computer and printer: $1,200 total cost, divided by 60 months total expected use, equals $20 per month · Office supplies: $25 per month 5. Add the fixed monthly costs to get the total fixed costs per month. (3.0 points) TIP: Now you know that your minimum selling price must be high enough to cover these fixed costs, too. You'll calculate your break-even point next. For example, the monthly fixed costs for the T-shirt company would be $445. 6. Calculate the selling price you would need to break even if your company sold 100 units of your product or service, using the steps below. a. Divide your total monthly fixed costs (from Question 5 above) by 100. This is the total fixed cost per unit. (3.0 points) For example, for the T-shirt company, this is $445 divided by 100, which is $4.45. b. Add the total fixed cost per unit (from 6a above) to the total cost of goods or services sold (from Question 3 above). This is your break-even point if you sold 100 units per month. (3.0 points) For example, for the T-shirt company, this is $14.25 plus $4.45, which is $18.70. This means that if the T-shirt company sold 100 shirts, it would need to sell the shirts for at least $18.70 each to break even. 7. Calculate the number of units you would need to sell to break even, using a selling price of your choice. Use the steps below. a. Choose a selling price that is higher than your total cost of goods or services sold (the amount from Question 3 above) but that is different from the selling price from Question 6b above. Pick a price you think is reasonable. (3.0 points) For example, The t-shirt company might decide that it is reasonable to price the shirts at $20 instead of $18.70. b. Subtract the total cost of goods or services sold (the amount from Question 3 above) from the selling price. This is the gross profit per unit. (3.0 points) For example, the T-shirt company would take its $20 price and subtract $14.25, which leaves $5.75. c. Divide the total monthly fixed costs by the gross profit from Question 7b above. This tells you how many units you must sell to break even. (3.0 points) For example, the T-shirt company would take its $445 monthly costs and divide that number by $5.75, which is 77.4. The company would round that number up to 78, so it would have to sell 78 shirts per month at the $20 price to break even. 8. Describe three external pricing factors that may affect your product or service specifically. (4–6 sentences; 6.0 points) 9. Describe three pricing strategies you could use to price your product or service. (4–6 sentences; 6.0 points) 10. Find and describe three real-world examples of unethical pricing strategies. (6–9 sentences; 9.0 points) Make sure your assignment meets the guidelines below and then submit it. Criteria Points Possible Points Earned 1. Description of proposed product or service was written in 2–3 sentences. 6 2. 4–6 variable costs were identified. 6 3. Variable costs were added correctly. 3 4. 4–6 fixed costs were listed. 6 5. Fixed monthly costs were added correctly. 3 6a. Total fixed cost per unit was calculated correctly. 3 6b. Break-even point was calculated correctly. 3 7a. A reasonable selling price was chosen. 3 7b. Gross profit per unit was calculated correctly. 3 7c. Total units needed to sell to break even was calculated correctly. 3 8. Three external pricing factors were described. 6 9. Three pricing strategies were described. 6 10. Three examples of unethical pricing strategies were described. 9 Total Points 60 © 2019 K12 Inc. All rights reserved.Page 2 of 2 Copying or distributing without K12’s written consent is prohibited.