MM WORKSHEET 6-8.doc

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Department
Business Administration
Course
Business Administration 3301K
Professor
Bob Larose
Semester
Winter

Description
MKT100 - Metrics Mastery Worksheets Worksheet: Metric 6 Pricing Wholesale to Retail 1) You are a manufacturer of widgets that sells your products to a wholesaler who in turn sells directly to retailers. You have developed a new widget and you know that your competition’s product retails for $23 in hardware stores. You know yours is slightly better, and are pretty sure your product could sell for $27. Assuming a retail margin of 33.3% and a wholesale margin of 25%, what is the wholesaler’s selling price, and how much can you sell the widgets to the wholesaler for? 2) As a small appliance manufacturer, your cost to manufacture and package your coffee maker is $10/unit. You want this to be a cash cow, so you decide to sell the coffee maker to your wholesaler for $19/unit. You know that the wholesaler’s margin is 25%, and that retailers typically take 33.3% margins on small appliances. What will your coffee maker retail for rounded to the nearest whole number? 3) A bearing manufacturer buys raw materials for $0.50 per unit, turns the raw materials into a roller bearing, and then sells the bearings to a wholesaler for $1.00 per unit. The wholesaler then sells the bearings to retailers for $2.00 per unit, and finally consumers buy the bearings for $3.00 per unit. What is the per unit margin in dollars for the manufacturer, wholesaler and retailer? What is the percentage margin for the manufacturer, wholesaler and retailer? What is the per unit margin in dollars and percentage margin for the entire chain? 4) If the raw material cost goes up by $0.25 per unit for the bearing manufacturer in question 3, what will be the retail price charged to consumers if all members in the chain maintain the same percent margin? What is the effect of the raw material increase to the consumer? Why is it important to understand channel margins and pricing practices? 1 of 3 MKT100 - Metrics Mastery Worksheets Worksheet: Metric 7 Break-Even 1) Apprentice Mousetraps wants to know how many units of its “Magic Mouse Trapper” it must sell to break even. The product sells for $20. It costs $5 per unit to make. The company’s fixed costs are $30,000. 2) Apprentice Mousetraps wants to know how many dollars’ worth of its “Deluxe Mighty Mouse Trapper” it must sell to break even. The product sells for $40 per unit. It costs $10 per unit to make. The company’s fixed costs are $30,000. 3) John’s Clothing Store employs three salespeople. It generates annual sales of $1 million and an average contribution margin of 30%. Rent is $50
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