Marketing

MKT 3301 Fall 2024

Problem Set

Chapter 18: Price Setting

Total Points: 50

This assignment is aligned

to the
Course Learning Outcome No. 4 outlined in the syllabus. Students will be able to calculate selling price using the markup method and calculate the breakeven point using different pricing scenarios.

The best approach is to type out your answer, submit a Word Document. For full credit, show formula used and steps of the calculations. Only 25% of the points will be given for correct answers without any steps shown.

1. An appliance retailer purchased a small vacuum cleaner for $56.00. He plans to add a 45% markup and resell. What will be the retail selling price for the vacuum cleaner? (2 pts)

2. If a retailer sells an oriental vase for $312.99. What was his markup if he bought the vase for $115.00 from the wholesaler (3 pts)

· Markup in actual dollars ________

· Markup (as a % of cost price) ________

· Markup (as a % of selling price) _______

· According to our textbook, typically, wholesalers and retailers use markup which is expressed as a % of ____________ for convenience.

·
Select the correct choice: A. cost price B. selling price

Wholesalers and retailers use markup which is expressed as a % of the selling price. So, the correct choice is: B. selling price.

3. Walgreens offers Centrum Multivitamin for $13.99 per Bottle (150 tablets). Occasionally, Walgreens promotes Centrum with a “buy two, get the third bottle for free” type of promotion. When a consumer participates in this promotion, what is the actual selling price per Centrum bottle during the promotion? __________________ (2 pts)

4. High Meadow Mfg. Co. sold its product through wholesalers and retailers-allowing the wholesalers a markup of 25 percent and retailers a markup of 35 percent.

If the retail selling price is $100 and the manufacturer’s cost is $30, what markup (in dollars) did High Meadow Mfg. receive on the sale of this product? Explain your answer and show calculation steps. (5 points)

5. The production cost of an automobile component is $55. The producer takes a 15 percent markup and sells the product to the wholesaler. What is the wholesaler’s cost? (5 points)

6. Kotler Bathroom product manufacturer just produced a low flush toilet which saves over 50% on water use per flush of the toilet. Kotler will make it available with merchant wholesalers for $125.00. The company expects its wholesalers and retailers to follow its recommended markup chain percentages where wholesalers take a 25% markup and retailers take a 40% markup. What does Kotler expect the final consumers to pay for this product at retail stores? ___________________ (8 pts)

7. John Fleming, marketing manager for the Athletic Sporting Goods Company (ASGC) is thinking about how the changes taking place among retailers in his channel might impact his strategy. The ASGC is a producer of different lines of sports products. John is looking for alternative ways to make money.

John Fleming is considering a new strategy to increase sales of tennis balls and new tennis racquets. The basic idea for
ASGC is to sell tennis balls in large quantities to nonprofit groups who resell the balls to raise money.

For example, a service organization at a local college bought 2,500 tennis balls printed with the college logo. The company charged $.50 each for the tennis balls-plus a $800 one-time charge for the stamp to print the logo. The service group plans to resell the tennis balls for $2.50 each and contribute the profits to a shelter for the homeless.

Questions based on the above. (5 pts)

7 a. What is the service organization’s average cost per printed Tennis Ball?

7 b. What is the total profit the service group hopes to make and contribute to the Shelter if it sells all 2500 tennis balls at $2.50 per ball?

Next Questions based on below scenario (10 pts)

ASGC is also considering adding tennis racquets to the product lines it produces.

This would require a $500,000 modification to its factory as well as the purchase of new equipment that costs $1,600,000. The variable cost to produce a tennis racquet would be $55, but John thinks that ASGC
could sell the racquet at a wholesale price of $82.

John thinks that if ASGC sells the racquet at a lower price, many other retailers might decide to carry it. However, the vice president of ASGC thinks that the tennis racquet is a superior product and that ASGC
should sell it for $99.99 to upscale country clubs only. The higher price would give a prestige image.

8. If
ASGC produces tennis racquets, how many racquets must it sell at $82.00 and $99.99 to break even? 

8a. Breakeven units at 82.00 _______________________________. (4pts)

8b. Breakeven units at 99.99 _______________________________. (4pts)

8c. If
ASGC wants to make at least $40,000 profit off the racquets, at a selling price of $82.00 what would the breakeven quantity be__________________________ (2pts)

9. Yoplait has new line of Greek yogurt in a 9 oz size. The Marketing Managers plan to test market the product in one small market for three weeks. They calculated the cost and projected sales for each of the different flavors:

Plain cost is .65 each with the projected sales of 15,000 units, Strawberry cost per unit is .80 with the projected sales of 18,000 units, Blueberry cost are .78 per unit with the projected sales of 12,000 units.

Each yogurt product will retail at the same price.
Using the average cost and a 40% markup, what will Yoplait price the 9 oz. Greek Yogurt at the retail level?

Ans. ______________ 10 pts.

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