UNT MKTG 3700 FINAL

For the channel chain of manufacturer → wholesaler → retailer → consumer, which of the following statements is not correct?

$ markup of the wholesaler and $ markup of the manufacturer are typically equal. Why would they, except by coincidence? They are two different businesses.

ABC mfg co has estimated breakeven volume of 50,000 units for its new widget. If fixed costs are $100,000, unit selling price is $25.00 and ABC sales force commission is 8% of selling price, what is their total $ contribution?

$100,000 #BEP=TFC/$C. Therefore $C=TFC/#BEP. Here, $C=$100,000/50,000=$2.00. and Total $C=$2.00*50,000=$100,000. The rest of the information is superfluous.

LilGuy Inc has manufacturing variable cost of $7.00 per unit, fixed costs of $27,000 and anticipated sales of 9,000 units. What is the desired selling price for an ROI of 10% on an investment of $180,000?

$12.00 uvc=$7.00; ufc=$27,000/9,000=$3.00. therefore unit total cost=$7+$3=$10.00. To this $ROI per unit must be added. $ROI=10%*$180,000=$18,000. pr unit, this is $18,000/9,000=$2.00. Therefore usp=$10+$2=$12.00.

Panda6 Inc. has three divisions. The following table shows the sales revenues for each division in 2013 and 2014. Please calculate the Division Three's growth rate percentage in 2014.

$220 in 2014, $200 in 2013. ($220-$200)/$200=10.00%

Mini Blenders Inc. has come up with a unit selling price of $10.00. Their Fixed costs are $20,000 for the year, during which 10,000 units are expected to be sold. A 20% profit margin on sales is included in the selling price. What is MBI's unit variable cost?

$6 per unit Unit Total Cost, using F1=10*(1-20%)=$8.00. UFC=$20,000/10,000=$2.00. Therefore, UVC=$8-$2=$6.00

ABC mfg co sells widgets. If unit selling price is $25.00, unit variable cost is $23.00 and Total Fixed Cost is $100,000, what is $BEP?

$C=$25-$23=$2.00. #BEP=$100,000/$2=50,000 units. $BEP=50,000*$25=$1,250,000.

In 2014, ABC Company had net sales of $500,000 and a gross margin of $ 300,000. The total overhead costs were $ 100,000 and the promotion costs were $80,000. The company sold 100,000 units. What was #BEP of the company in 2014?

$C=$300,000/100,000=$3. TFC=100+80=$180,000. #BEP=$180,000/$3=60,000

Vegi Juice is sold in the supermarket at $12 per case. Each case has 10 bottles of Vegi Juice. The total variable costs per case are $10. What is the $C of the Vegi Juice per bottle?

$C=12-10=$2 per case = 2/10=$0.20 per bottle.

ABC mfg co has estimated breakeven volume of 50,000 units for its new widget. If fixed costs are $100,000, unit selling price is $25.00 and ABC sales force commission is 8% of selling price, what is the non-commission unit variable cost?

$C=TFC/#BEP=$100,000/50,000=$2.00. UVC=USP-$C=25-$2=$23. Commission=8%*25=$2.00. Therefore, non-commission UVC=$23-$2 commission=$21.00

ATT Inc. sells a cordless phone for $ 50 per unit. The unit material cost is $ 10 and unit labor cost is $ 15. The annual manufacturing overheads are $ 1 million and promotion and advertising costs are $500,000. If the promotion cost increased by $ 35,000. What is Δ$BEP for the company?

$C=usp $15 - uvc ($10+$15)= $25. Delta i.e. the change TFC=$35,000. Therefore Delta #BEP=35000/25=1,400, Delta $BEP=1400*50=$70,000

ATT Inc. is developing a new type of cordless phone that would be sold for $ 50 per unit. The unit material cost is $ 10 and unit labor cost is $ 15. The R&D costs incurred so far for the prototype are $ 500,000. The annual manufacturing costs are $ 1 million and the promotion and advertising costs are expected to be $500,000. What is #BEP for the company?

$C=usp $15 - uvc ($10+$15)= $25. TFC = $1.5 million (exclude R&D, a sunk cost). #BEP=$1.5 million/$25=60,000

Panda Toys Inc. plans to sell one line of its panda toys for $ 20. The material cost per unit is $ 4 and unit labor cost is $ 6. The annual overhead fixed costs are $ 500,000 and the promotion and advertising cost is $100,000. What is the $C of this panda toy line?

$C=usp of $20- uvc of ($4+$6)=$10

It is January 2015. SIB Inc, a small manufacturer unhappy with its performance, (i) hires an independent agent (and therefore, the agent's sales force), and (ii) gets rid of its own "salary only" sales force. All other costs remaining the same, how will these changes affect SIB in 2015 versus 2014?

(i) will increase unit variable cost, and, (ii) will decrease total fixed cost Agent salesforce is typically compensated using commission, a variable cost. Own salesforce (here) is compensated using salary, a fixed cost. Therefore hiring agent icreases variable cost. Firing salesforce reduces fixed cost.

Topdog is a toy company, whose profit/sales percentage is 13% in 2012, 16% in 2013 and 20% in 2014. Assuming simple trend, what is the growth multiplier for the p/s % of this company for 2015?

1 + (20.00%-16.00%)/16.00% = 1.25

Cool Fan Company sells 10,000 units to wholesalers each year at $60 per unit. The materials cost $10 per fan and unit labor cost is $15. The total promotion and marketing costs are $100,000. The facility expenses are $80,000 per year and other overheads cost $20,000. What is the unit variable cost of a fan?

10+15=$25

NT Inc has registered an impressive 40% sales growth for the just concluded calendar year 2014 and expects to repeat this for 2015. Therefore, (S=Sales)....

2014 Growth Rate % = (just concluded year 2014 - previous year 2013)/previous year 2013. This is given to be 40% and assumed to repeat for 2015.

Advising NT Inc., you point out that weighted averaging may be done in the context of...

All four situations could be simplified by applying weighted average. For instance, if you know the % of unit or dollar sales for each product, these could be used as weights to calculate weighted average of selling prices, packaging costs, material costs or shipping costs.

Apple Computer Co. typically calculates the proposed price for one of its new products two ways. (1) Start with how much it costs to produce a unit, add their typical profit margin and then estimate the likely price to the consumer at the retail outlet, and (2) Start with an attractive retail price and then figure out whether Apple can profitably make the product if it sells at that retail price. In other words,

Approach One starts with the manufacturer Apple and works towards the retailer. This is forward or top down markup pricing. Approach Two starts with a good retail price and works towards the manufacturer. This is backward or bottom up markup pricing.

Advise Denton Snacks, Inc., one more time! A 200% markup on cost is the same as...

Assume cost=$100 Markup is 200% of this=$200 Therefore usp=100+200=$300 %musp=$mu/sp=200/300=66.67%

The table shows the likelihood of NT Inc's unit sales at different prices. At a price of $20.00, a reasonable estimate of NT's expected sales in dollars is:

At $20.00, weighted average for units sold=60%*6000+20%*8000+10%*10000+10%*12000=7,400 units. 7400*$20=$148,000 in sales

Two projects, A and B, have an expected life span of 5 years. For both, assume that the initial investment, % cost of capital and 5 year Net Cash Flows of $10K, $20K, $30K, $40K and $50K are all identical. There is one with a key difference: Project A starts with $10K NCF in Year 1 and ends with $50K in year 5. Project B is just the opposite: $50K NCF in Y1, $10K in Y5. NPV analysis is likely to favor which investment and why?

B is better than A because its larger NCFs come in sooner and therefore, once discounted, yield larger present dollars.

Rainbow Inc. had total sales of $ 480,000 in 2014 and the credits and allowances totaled $ 10,000. The company sold 150,000 units with per unit cost of goods sold of $ 2. The average inventory at cost is $100,000. What is the Inventory Turnover ratio of the company in 2014?

COGS=150*$2=$300, Avg Inventory=$100. Therefore IT ratio=$300/$100=3

SIB Inc, a small company, hires salespeople whom it plans to motivate to give their best. At the same time, the company also wishes to protect the salespeople from income uncertainty and anxiety. Your advice on how the SIB salespeople should be paid?

Combination of fixed cost, like salary and variable cost, like commission % Salary provides secure, certain, income. Commission % motivates, challenges the salesforce towards better performance and commensurate rewards. Therefore, incorporating both features in the compensation plan is a good idea, given SIB's objectives.

I.M. Boss asks you to explain the difference between the Cost of Capital and Discount Rate in a multi-year Net Present Value analysis of a single project. You correctly point out that typically....

DR is derived from CC CC stays fixed for this NPV problem, but DR changes from year to year Recall any of the NPV problems, say, GGK corp. There the CC% was 11% or something like that and we used that for the entire problem. However the DR for each of the 10 years was calculated as DR=1/(1+CC%)^year, so DR differed for Y1, Y2 etc. Recall that the farther the year, the lower the DR.

You are wondering how to explain price elasticity of demand to the management of the Houston Astros baseball team, in user-friendly language. As you know, price elasticity may be calculated using the formula in which the denominator is... [(New Quantity - Old Quantity) / Old Quantity] ---------------------------------------------------------- [(New Price - Old Price) / Old Price]

Denominator is relative change in P, which is also the % change in P.

Macy's sells 12 skirts at $ 50 each and it sells 5 more at $40 each. What is the total $ markdown here?

Each shirt that is marked down is down $10. 5 shirts are marked down and sold, so 5*10=$50.00

Project M and N are alternative investment proposals. Both have the same 10 year life span but different Cost of Capital %s. You have been hired as the consultant and have prepared a NPV worksheet. Year 10 has a Discount Rate of 0.70 for M and 0.65 for N. How would you interpret this for the client?

Each year 10 dollar is worth more today for M than N Discount Rate refers to the present value of a future dollar. Naturally, because of discounting, that $1 of the future is worth less than that today. Since M has a Year 10 DR of 0.70 vs 0.65 for N, each Year 10 M dollar is worth more (0.70) than the corresponding N dollar (0.65).

It is January 1, 2015. Forecasting skills are likely to be of critical importance to NT Inc (NTI) in preparing this document

Forecasting means 2014 is irrelevant. January 2015 means NTI would like to know what might happen during 2015. This requires proforma income statement.

Rainbow Inc. had total sales of $ 480,000 in 2014 and the credits and allowances totaled $ 10,000. The company sold 150,000 units with per unit cost of goods sold of $ 2. The administrative and sales costs were $ 100,000. What is the gross profit of the company in 2014?

GP=Gross Sales-allowances-CoGS=$480-$10-(150*$2)=$170,000

It is January 2015. You have the following data for ABC Inc. Sales for 2014 = 45,000 units; for 2013= 40,000; for 2012 =35,000. Assuming trend projection, based on the previous year, which of the following correctly computes the growth multiplier for 2015?

Growth Rate % for 2014=(2014-2013)/2013=(45,000-40,000)/40,000 This is expected to continue for 2015. Growth Multiplier for 2015 = 1 + GR for 2015 (which is the same as GR for 2014, above). Therefore GM2015=1+(45,000-40,000)/40,000.

Estimating the trend-based 2015 growth rate for ABC Inc, in a growth industry. Sales for 2014 = 50,000 units; 2013 = 45,000; 2012 =40,000 units. Pick the correct expression.

Growth Rate % for 2014=(2014-2013)/2013=(50,000-45,000)/45,000 =5,000/45,000=1/9 or 11.11%.. This is assumed to repeat for 2015.

Estimating trend-based 2015 sales for ABC Inc, in a growth industry. Sales for 2014 = 50,000 units; 2013 = 45,000; 2012 =40,000 units. Pick the correct expression.

Growth rate % for 2014=(2014-2013)/2013=(50,000-45,000)/45,000 =5,000/45,000=1/9 or 11.11%. This is expected to repeat for the upcoming 2015. Therefore, Growth Multiplier for 2015=1+GR% for 2014 =1+11.11%=1.1111. And sales for 2015=2014*GM=50,000*1.1111.

Which of these items is likely to be relatively accurately estimated, when preparing the 2015 pro-forma Income statement for NT Inc., in an uncertain economy?

In an uncertain economy, sales forecast is uncertain. Therefore all things related to that are also iffy. Rent is based on a lease and must be paid according to predetermined schedule, regardless of anything else. Therefore that rent estimate in a Proforma Income Statement is likely to be quite accurate, regardless of the state of the economy.

Coupon promotions for consumer non-durables, such as packaged frozen foods, are often money losing propositions for manufacturers such as P&G. That is, the revenue from the promotions does not cover their costs. This results from....

Inability to prevent coupon redemption by existing as opposed to new customers Coupon promotions often end up losing money because of cannibalization by existing customers who get hold of the coupon and use it, although it was not intended for them. However, coupon promotions also bring in lots of new customers whose subsequent purchases without coupon and therefore at higher $C are likely to erase those losses, if any, from the coupon promotion itself. See the Baja Foods case in M08.

In terms of the analogy explained in class module 11, which of these NPV concepts is the equivalent of the "maximum % interest rate you could pay a loan shark for your investment amount loan and still walk away a free person at the end of the project's life span"? a. Discount Rate b. Cost of Capital c. Internal Rate of Return or IRR d. NPV e. Payback Period

Internal Rate of Return or IRR Refer to the NPV problems. e.g. A vs B or Widgets. Recall setting the %CC equal to the IRR and seeing the previously calculated NPV become zero. Therefore, IRR is that cost of capital for which the Cumulative Discounted Net Cash Flow over the Life of the Project i.e. NPV, becomes zero. We used the analogy and said the IRR is like the interest you pay the loan shark. That is why, IRR needs to be >>> %CC for a NPV problem. If it does, it is good news!

A manufacturer makes a product for $6 and adds a 25% profit on selling price. They sell to a wholesaler who sells it for 50% markup based on manufacturer selling price. The retailer marks it up by 25% on consumer purchase price and sells the product to the consumer. What is the total $ markup in going from manufacturer's cost to consumer purchase price, i.e., the $ difference between the two?

Manufacturer markup is 25%musp. Wholesaler markup is 50%muc. Retailer markup is 25% musp. Therefore, the correct markup chain for calculating retail selling price requires applying F2, then F3, then F2 again: {$6/(1-25%)}*(1+50%)/(1-25%) = $16. The difference between manufacturer cost and consumer purchase price is $16-$6=$10.

when %markup is based on selling price: $cost=$selling price *(1‐%musp)

Markup Formula 1

when %markup is based on selling price: $selling price =$cost/(1‐%musp)

Markup Formula 2

when %markup is based on cost: $selling price=$cost*(1+%muc)

Markup Formula 3

when %markup is based on cost: $cost=$selling price/(1+%muc)

Markup Formula 4

Markup conversions: %musp = %muc/(1+%muc)

Markup Formula 5

Markup conversions: %muc = %musp/(1‐%musp)

Markup Formula 6

Project M has a 10 year life span and you, as the consultant, are looking at its Excel worksheet and feel quite comfortable with "the Cumulative Discounted Net Cash Flow over the life of the project." In other words, the _____ is looking good.

Net Present Value "Cumulative Discounted Net Cash Flow over the Life of the Project" is the last entry in the CDNCF column of the NPV worksheet and its short name is NPV. See the A vs B, Widgets or GGK examples in M11.

A product sells 450 units at a price of $185 each. When price is increased to $200 each, sales go down to 400. Recalling Price Elasticity of Demand (see formula sheet), here...

PED=[(new Q-old Q)/Old Q] / [(new P-old P)/Old P] Here, PED=[(400-450)/450] / [($200-$185)/$185] =-1.37=1.37 expressed as absolute value. This is > 1, therefore demand is elastic.

In this course, we did not encounter the cannibalization problem in the context of...

Price decisions Place decisions We encountered and learned about the cannibalization problem ONLY in product decisions (e.g. Hannibal pedestal vs table fan) and Promotion decisions (e.g. Baja foods couponing cannibalization). We did not deal with the cannibalization issue in Price or Place decisions.

A wholesaler purchases widgets for $8 per unit from the manufacturer and sells it to retailers who then sell to consumers. The wholesaler marks up by 20% on the retailer purchase price, while the retailers mark up by 25% on the wholesaler selling price. Here, the correct markup chain for calculating the retail selling price to the consumer is:

Starting with $8.00, the wholesaler's cost, apply F2 ($selling price =$cost/(1‐%musp)) using the 20%musp of the wholesaler, followed by F3 ($selling price=$cost*(1+%muc)) and the 25%muc of the retailer. usp retailer=[8/(1-20%)]*(1+25%)=$12.50

Explain to I.M. Boss, your CEO. The "substantial" criterion in NPV analysis....

Substantial means "large". We desire a large NPV, compared to the intial investment.

Frito Lay is concerned about likely cannibalization of their existing salty snack lines by their proposed line of veggie snacks. This problem is MORE LIKELY TO BE AGGRAVATED, if.....

The new line's $C is lower than the existing line's $C Naturally, if $C for the new product is lower than $C for existing product, each cannibalized sale depresses total $C and therefore, ultimate profits after fixed costs. See Great Lakes, Hannibal and Turfex cases in M07.

The marketing manager at Fun! Inc. is likely to be relatively more interested in:

The profitability of their decisions. The proforma income statement of their strategy. They are interested in actual profits from the IS and likely profits from the proforma IS.

MM Inc. plans to go direct to 5,000 US retailers spread out all over the country, bypassing their 15 wholesalers. It would be reasonable for them to expect changes in.....

The proposed change i.e. going FROM just 15 direct customers TO 5000 customers will affect MM's average inventory i.e. stock, and, accounts receivable i.e. monies owed to MM by its customers. Therefore, the costs associated with inventory and a/r will also change. In fact, they will go up!

ABC manufacturing company sells each of its tractors at $20,000 directly to the retailers. ABC pays each of its ten salespersons $60,000 per year. Each salesperson also receives a 5% commission for every tractor sold. The direct labor and material cost $ 8,500. What is the net profit (i.e. net contribution or CTM) to the company, if they sell 1,000 tractors?

Total $C=$10,500,000. TFC=$600,000. CTM=10500-600=$9,900,000

Panda Inc. had total sales of $24,000 from bamboo bowls in 2014. The company sold 6,000 units of bamboo bowls and the total variable costs were $6,000. What is total $C of bamboo bowls?

Total $C=Total Sales - Total Variable Costs = 24000-6000=$18,000

Demand for products like a Caribbean cruise is generally considered price-elastic. This means.....

Total revenue increases when price is decreased Total revenue decreases when price is increased price-elastic means demand is very sensitive to price. When price is increased, demand falls sharply, so revenue ends up decreasing. When price is decreased, demand increases sharply, so revenue ends up increasing.

The Houston Astros discover by carrying out research on select game days that for a relatively price-elastic product such as a ball game, (up to a point, of course).....

Total revenue increases when price is decreased Total revenue decreases when price is increased price-elastic means demand is very sensitive to price. When price is increased, demand falls sharply, so revenue ends up decreasing. When price is decreased, demand increases sharply, so revenue ends up increasing.

Demand for products like store brand Vitamin D Milk are generally considered price inelastic. This means.....

Total revenue increases when price is increased Total revenue decreases when price is decreased Inelastic means weaker demand response to changes in price. Therefore, price increase means demand falls but not strongly, so total revenue increases. When there is a price decrease, demand goes up, but weak response means total revenue decreases. You simply do not greatly increase or decrease your consumption of a basic product such as milk in response to a price change, down or up.

The premium priced Starbucks Coffee maybe one example of a relatively price-inelastic product for which.....

Total revenue increases when price is increased Total revenue decreases when price is decreased price-inelastic means demand is not very sensitive to price. When price is increased, demand may fall but not sharply, so revenue ends up increasing. When price is decreased, demand may increase but not sharply, so revenue ends up decreasing.

Sunshine company manufactures 100,000 table fans every year with a unit selling price of $20. The direct material cost for a table fan is $5, and direct labor cost is $4. The factory overhead is $150,000 and the administrative costs are $ 200,000. The company also expends $ 150,000 on advertising every year. What is the $C of a table fan?

USP $20 - UVC $9 = $C =$11

T. Jones, sales manager for AutoComp Inc., an American manufacturer of automotive components for the replacement market has just returned from India with a near-deal for an "exclusive" wholesale distributor to handle sales to independent Indian auto parts retailers. However the wholesaler is insisting on a markup of 25% on AutoComp's selling price. AutoComp would like to continue the typical USA wholesaler mark up of 20% on their retail dealers' purchase price. Which option is better? (choose the best answer!)

Wholesaler wants 25% on AutoComp purchase price = %muc for wholesaler. AutoComp (in the USA) is used to wholeslaer markup of 20% on retailer purchase price, which is %musp for wholesaler. Using F5, you can figure out that 25%muc is the same as 20%musp. So, there is no difference here between what the wholesaler wants and what AutoComp is offering!

A wholesaler purchases each unit for $8 from the manufacturer and marks it up by 25% on the manufacturer selling price. Afterwards, the wholesaler sells the widget to retailers, who typically mark up by 33.33% on the consumer's purchase price at the store. Here, the correct markup chain for retail selling price is:

You are asked to calculate retail selling price starting with manufacturer selling price in this-top down markup problem. Wholesaler markup is 25%muc and retailer markup is 33.33% musp. Starting with the $8 wholesaler cost, apply F3 to calculate wholesale sp which is the retailer's cost and then F2 to calculate retail sp.

Jane is investigating the prospects for a Vista Ridge mall outlet in 2015 that would sell only silk ties. As her professional consultant, please help her, as she tries to figure first year breakeven sales for her store. Which of these IS treated as sunk cost?

Your consulting fee is a "Sunk Cost" that is irrelevant to and hence should not be included as a fixed cost item in Breakeven Analysis. All the other items ARE relevant fixed costs. see M04 discussion on sunk costs as part of the Athens case.

In a new automobile of specific make and model, which of the following are likely to be variable costs?

a. The tires b. The windshield c. The stereo d. The engine e. All of (a-d) above. Correct Response Feedback: All of these will be needed for each and every car. All are UVC items.

Which of these items is unlikely to be relatively accurately estimated, when preparing the 2015 pro-forma Income statement for NT Inc., in an uncertain economy?

a. sales forecast and hence, sales revenue b. cost of goods sold (as a % of sales) c. gross margind. sales force commission at a rate of 6% of the sales dollar e. all of the above will at best be approximate estimates in such an economy Correct Response Feedback: In an uncertain economy, sales forecast is uncertain. Therefore all things related to that are also iffy. Note that gross margin is sales minus CoGS. Since they are unlikely to be firm estimates, so too would Gross Margin.

In January 2015, Crazy Toys Inc will switch TO a relatively shorter distribution channel (direct to the 4,000 retailers) FROM a relatively longer distribution channel (sell only to 10 wholesalers, who take full responsibility for servicing 4,000 retailers, who then sell to consumers). The product will remain unchanged. Company demand is stable, and hence production quantity will pretty much stay at 2014 levels. Therefore, Crazy Toys Inc is most likely to see.....

an increase in sales force costs, variable and/or fixed Switching TO serving 4000 retailers FROM just 10 wholesalers will require more salespeople. No change in product, so variable costs will be unaffected.

For 2015, Dow Chemical would like to reach a certain $ profit goal, while comparing the alternatives of increasing the commission % paid to its field reps versus increasing their salaries. You point out that such issues can be easily investigated through.....

comparison of # and/or $ RLS to reach 2015 profit goal This is the situation in the BFV10 valve case. Increasing %commission increases UVC. Increasing salary increases TFC. Both changes affect the breakeven point. Profit Objective must be met. Hence need to calculate # and $ RLS.

Which of these IS UNLIKELY TO create the cannibalization problem, as Nabisco gets ready to add MINTO, a "mint cookie" to its current cookie line? a. MINTO sales eat into competitor cookie sales b. MINTO is bought by consumers who never ate any cookies before c. MINTO is bought as "additional purchase" by Nabisco's current customers d. MINTO purchases replace Nabisco's current customers' usual Nabisco cookie purchases e. choices a, b, and c above are all unlikely to result in cannibalization

e. choices a, b, and c above are all unlikely to result in cannibalization Cannibalization is the phenomenon when a company's new product eats into the sales (and, therefore, profits) of that company's existing product. The new product can hurt its own sibling, stable mate, especially if $C for the new product is lower than that for the existing product. See the Great Lakes case in M07.

John's Hardware, a small retailer in your part of town, would like to determine selling price of a new glue gun. The store's customary % markup is based on JH's selling price. Naturally, JH also know the manufacturer's selling price. Please help the store?

markup based on JH selling price = %musp Since they know their cost (purchase price), JH should determine usp using F2. That is, sp = cost /(1-%musp)

Panda Toys Inc. plans to sell one line of its panda toys for $ 20. The material cost per unit is $ 4 and unit labor cost is $ 6. The annual overhead fixed costs are $ 500,000 and the promotion and advertising cost is $100,000. If the unit labor cost is dropped to $ 5, what is the #BEP for the company?

new $C=usp of $20- uvc of ($4+$5)=$11; new #BEP=TFC of $600,000/$11=54,546, rounded up.

The following table shows the likelihood of different sales volumes at different prices. Sales Volume in Units 6,000 8,000 10,000 12,000 $5.00 0.10 0.20 0.40 0.30

weighted unit sales at $5 price=9,800

A manufacturer sells a product for $5 per unit to a wholesaler who sells it at a markup of 37.5%, based on retailer purchase price. The retailer adds another $2 and sells the product to the consumer. What is the retailer's markup?

wholesaler buys for $5 and marks up 37.5% on retailer purchase price i.e. %musp for wholesaler. Using F2, wholesaler selling price=retailer cost=$5/(1-37.5%) = $8. Retailer adds $2 markup so retailer sp=8+2=$10. %muc retailer=2/8=25%; %musp retailer=2/10=20%

Consumers buy swimming goggles at $20 per pair. The retailer sells the goggles at a 20 %musp. The wholesaler adds a $ 2 markup in selling to the retailer. What is the selling price of the manufacturer?

wholesaler sp=retailer cost=using F1, 20*(1-20%)=$16.00. wholesaler $mu=$2, so their cost=manufacturer sp=16-2=$14.00.