MARKETING BY THE Numbers
MARKETING BY THE Numbers
One external factor that manufacturers must consider when setting prices is reseller margins. Manufacturers do not have the final say concerning the price to consumers; retailers do. So manufacturers must start with their suggested retail prices and work back, subtracting out the markups required by resellers that sell the product to consumers. Once that is considered, manufacturers know at what price to sell their products to resellers, and they can determine what volume they must sell to break even at that price and cost combination. To answer the following questions, refer to Appendix 2.
1. 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? (AACSB: Communication; Analytical
Reasoning)
Ans. The manufacturer sells the product to the wholesaler at $ 480.
2. 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? (AACSB:
Communication; Analytical Reasoning)
Total cost: fixed cost + variable cost
Chapter 11 MARKET AND ECONOMY
Pizza Hut
Restaurants of all kinds have scrambled to keep customers coming in during recent difficult economic times. Pizza Hut is in an unusual spot. It isn’t exactly fast food, but it isn’t quite full-service fare either. Pizza Hut has never been perceived as being on the low end of pizza prices. As the economy sagged, all these factors cooled down business for the red-roofed purveyor of pies. So Pizza
Hut did what many companies did. It cut prices. At first, it shocked the pizza category with its “$10 any” promotion—any pizza, any size, any crust, any toppings, for just $10.
Customers really responded to
One external factor that manufacturers must consider when setting prices is reseller margins. Manufacturers do not have the final say concerning the price to consumers; retailers do. So manufacturers must start with their suggested retail prices and work back, subtracting out the markups required by resellers that sell the product to consumers. Once that is considered, manufacturers know at what price to sell their products to resellers, and they can determine what volume they must sell to break even at that price and cost combination. To answer the following questions, refer to Appendix 2.
1. 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? (AACSB: Communication; Analytical
Reasoning)
Ans. The manufacturer sells the product to the wholesaler at $ 480.
2. 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? (AACSB:
Communication; Analytical Reasoning)
Total cost: fixed cost + variable cost
Chapter 11 MARKET AND ECONOMY
Pizza Hut
Restaurants of all kinds have scrambled to keep customers coming in during recent difficult economic times. Pizza Hut is in an unusual spot. It isn’t exactly fast food, but it isn’t quite full-service fare either. Pizza Hut has never been perceived as being on the low end of pizza prices. As the economy sagged, all these factors cooled down business for the red-roofed purveyor of pies. So Pizza
Hut did what many companies did. It cut prices. At first, it shocked the pizza category with its “$10 any” promotion—any pizza, any size, any crust, any toppings, for just $10.
Customers really responded to