Assignment 4: Pricing Methods
1. Given the following information, calculate the unit price, using the cost-plus method.
Fixed costs =$350 000, Variable costs = $65.00 per unit of production, Profit objective =$29,500
for 600 units.
Price= [$350000+($65x600) + $29500] / 600
Price= $697.50
2. Calculate the break-even point in units and dollars, given the following information.
Fixed costs =$300 000, Variable costs =$0.75 per unit, Selling price=$2.50 unit
Break-even (units)= $300000/ ($2.50- $0.75)
Break-even (units)= 171429
Break-even (dollars)= $300000/ [1-(0.75/2.5)]
Break-even (dollars)= $428571.42
3. A manufacturer of microwave ovens has fixed costs of $250 000, and variable costs are
$175 for each unit produced. The company would like to make a profit of $20 000 on the
production of 200 units. What selling price must the company charge?
Price= $250000+ ($175x200) + $20000/200
Price= $1525
4. A manufacturer has total fixed costs of $54 000. Variables costs are $2.50 unit. The
product sells for $8.00. What is the break-even in units?
Break-even (units)= $54000/ ($8.00-$2.50)
Break-even (units)= 9819
5. A belt manufacturer believes consumers will pay $25.00 for one its belts. The belts are
first sold to a wholesaler who then sells them to a retailer. The manufacturer's markup to
the wholesaler is 25%, and the wholesalers take a markup of 15% in selling to retailers.
What price did the wholesaler and retailer pay for the belts. Use demand-based pricing
method to arrive at the prices.
Wholesaler’s cost= $25
Selling price= $6.25
Wholesalers cost and selling price= $31.25
Retailer’s cost= $31.25
Selling price= $4.68
Retailer’s cost and selling price= $35.93
6. A retailer buys t-shirts for $10.00 and wants to sell them for $13.00. What percentage
markup on cost?
Markup on cost= [$3- $10/$10] x100
Markup on cost= 30%
7. A retailer buys a new line of toasters from a manufacturer at a unit cost of $120.00. The
desired profit margin for sale of the items in the store is 40%. What is the retail selling
price?
Retailer’s cost= $120
Selling price= $48
Retailer’s cost and selling price= $168
8. A retailer regularly sells private label blue jeans for $29.99. A semi-annual sale is planned,
and the jeans will go on sale for $19.99. What is the percentage markdown on the selling
price.
Markdown percentage= 10x100/$19.99
Markdown percentage= 50.02%
