Marketing By Numbers

Q1) A consumer purchases a computer for $800 from a retailer. If the retailer’s markup is 30 percent and the wholesaler’s markup is 10 percent, both based on their respective selling prices, at what price does the manufacturer sell the product to the wholesaler?

Data

MSRP(Manufacturer’s Suggested Retail Price) = $800
Retailers Markup = 30% = 0.30
Wholesalers Markup = 10% = 0.10

Solution

To determine the price Computer Firm will charge wholesalers, we must first subtract the retailer’s margin from the retail price to determine the retailer’s cost ($800 x 0.30) = $240). The retailer’s cost is the wholesaler’s price, so Computer Firm next subtracts the wholesaler’s margin ($240 x 0.10) = $24).

1) Retailers Markup = $ 800 x 0.30 = $ 240
2) Wholesaler Markup = $ 560 x 0.10 = $ 56

So Now,

Suggested Retail Price = $800 minus retail margin (30%) = $-240
Retailer’s cost/wholesaler’s price = $ 560 minus wholesaler’s margin (10%) = $- 56
Wholesaler’s cost/Computer price = $ 504

Q2) If the unit variable cost for each computer is $350 and the manufacturer has fixed costs totaling $2 million, how many computers must this manufacturer sell to break even? How many must it sell to realize a profit of $50 million?

Formula

1) Breakeven = Total Fixed Cost/Contribution
1.2) Per Unit Contribution = Selling price - variable cost
2) Unit volume = fixed cost + profit goal /Selling price - variable cost
Data
Variable Cost = $350
Fixed Cost = $2 million
Selling Price = $800
Profit Goal = $50 million
Solution
1 Breakeven = $2,000,000 / $800 -$ 350 Breakeven = 4444.44 Units or 4445 Units Thus, at the given variable cost and Fixed Cost & the selling Price, firm’s will break even at 4444.44 units.

2 Unit Volume = $2,000,000 + $50,000,000 / $800 - $350 Unit Volume = 115555.5 Units or 115556 Units

Thus, to earn a