1. A lawnmower manufacturer has a unit cost of $140 and wishes to achieve a...
1. A lawnmower manufacturer has a unit cost of $140 and wishes to achieve a margin of 30% based on selling price. If the manufacturer sells directly to a retailer who then adds a set margin of 40% based on retail selling price, determine the retail price charged to consumers.
2. A firm is able to sell 25,000 units at $ 10 per piece. The company fixed cost is $50,000. Variable cost is $5 per unit.
a. What is the contribution per unit?
b. What is the breakeven sales in $? What is the breakeven sale in units?
c. What is the markup on sales price? What is the mark up on total cost?
They raise the price to $15 and demand drops to 15000.
d. Calculate the price elasticity.
e. What is the new markup (profit margin %) on the sales price ($15)?
f. What is the new mark up (profit margin %) on total cost?
g. Please calculate the total profit for this company as well as the profit per each toy sold.
h. Are they better off raising the price?
Homework Answers
1)
Manufacturer price:
= $140/(1-30%)
= $200
Retailer price to consumers:
= $200/(1-40%)
= $333.33
Hence, price charged to consumer is $333.33
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