Question

Jose Ruiz wants to start a company that makes snowboards. Competitors sell a similar snowboard for $345 each. Jose believes he can produce a snowboard for a total cost of $270 per unit, and he plans a 30% markup on his total cost.

1-a. Compute Jose’s planned selling price.

1-b. Can Jose compete with his planned selling price?

• Yes

• No

Answer 1

Question 1-a:

Planned Selling Price = Total Cost + (Total Cost X Markup)

Planned Selling Price = $270 + ($270 x 30%)

Planned Selling Price = $270 + $81

Planned Selling Price = $351

Question 1-b:

No, he can not compete with his planned selling price because it is higher then the competitors selling price of $345.