Mktg/111 Week 4 Case Study

Marketing Principles – MKTG 111
Price & Marketing Math Case #4
Marketing & Graphics Communications Department
Eibling Hall 401

Washburn International: Guitars and Break-Even

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Washburn International began manufacturing guitars 1883 in Chicago, Illinois at its original location on Maxwell Street. Eventually, Washburn and the Maxwell Street location would emerge as the epicenter of a musical movement. In later years, Washburn opened another manufacturing facility in Nashville, the home of country music, in order to capitalize on booming guitar sales in the south.
The history of Washburn Guitars is the history of a wide range of musicians. From blues players who shaped rock ‘n roll to multi-platinum recording artists to
If Washburn achieves the sales target of 25,000 units at $850 suggested retail price, what will its profit be?

Show your work. Hint: Calculate Washburn’s selling price to retailers first. (Profit = Total Revenue – Total Costs)
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5. Assume that Washburn moves its production to Nashville and that the costs are reduced as projected in the case. Given a $850 suggested retail price, what will be the new
(a) BEP in units
(b) BEP in Dollars
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6. Assume that Washburn negotiates a new retail markup of 35%, with a suggested retail selling price of
New Selling Price $________
Chicago
Nashville
BEP in Units

BEP in dollars

7. If for competitive reasons, Washburn eventually has to move all its production to China, (a) which specific costs might be lowered and (b) what additional costs might it expect to incur? To answer this question, visit the following website:

http://globaledge.msu.edu/ Click on Country Insights and find China.

8. The Washburn buyers have managed to negotiate a price of 685.46 CHINA RENMINBI (CNY). What does this convert to in U.S. dollars? HINT: Use the following link or another currency converter to find the answer: http://www.bloomberg.com/invest/calculators/currency.html

9. With all of the options given in this case, which retail pricing strategy would you choose and why? In addition, which U.S. manufacturing facility would you choose?
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Helpful Equations:

• To Find Manufacturers selling price to retailers given