Question

#1

The manufacturing costs, all variable, for a product are $1.50 per unit. Wholesaler margins are 50 per cent and retailer margins are 75 per cent (both calculated as a percentage of their respective selling prices). The manufacturer wants to make a minimum of $100,000 profit over and above fixed costs of $50,000. What will be the minimum retail selling price if the manufacturer produces only 10,000 units?

_________________________________________________

#2

Brilliance Toothpaste sells at retail for $1.50 per tube. The manufacturing cost is $0.25 per tube and the fixed costs total $20,000. The manufacturer's margin is 50 per cent and the retailer's margin is 33 per cent. All margins are calculated on selling prices. On sales of 200,000 units, calculate the manufacturer's profit, the wholesaler's margin, and the retailer's margin.

Answer 1

1)	Fixed overhead per unit = $50000/10000 units
			=$5 per unit
	Total Cost Per unit = $5+$1.50
		=$6.5
	Profit per unit = $10000/10000 =$1
	Selling price to wholeseller = $6.5+1 = $7.5
	Wholesaler selling price =
		=$7.5/(1-0.75)
		=$30
	Retailers selling price =$30/(1-0.50)
	=$60
2)	Manufacturer margin
	Total cost per unit = $0.25+ ($20000/200000)
		=$0.25+0.1
		=$0.35
	Manufacturer selling price per unit = $0.35/0.50
		=$0.70 per unit
	manufacturer's profit =($0.70*20000) - ($0.25*20000) -$20000
		=$70000
	Retailers margin = $1.50*33%
	=$0.495
	retailers margin in total =$0.495*200000
		=$99000
	Selling price of Wolesaler = $1.5-0.495
	=$1.005
	Cost to wholesalers = $0.70
	Margin per unit =0.305
	Total margin = $0.305*200000
		=$61000