GBA5208 - Marketing Information, University of Houston Downtown, USA

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Question 1. What pricing objective(s) is a skimming pricing policy most likely implementing? Is the same true for a penetration pricing policy? Which pricing policy is probably most appropriate for each of the following products?

a. The NEW battery operated auto called Flash: no gasoline needed - 24 hour rechargeable battery________________

Answer: Skimming Price policy

b. a new type of home flashlight _________________

Answer: One price policy

c. a revolutionary skin patch which complete removes the urge to smoke___________

Answer: Dynamic Pricing

d. Felix protein Shakes__________________

Answer: Dynamic Pricing

Question 2. Is price discrimination involved if a large oil company sells gasoline to a taxicab associations for 3.0 cents less per gallon than what its sells to retail service stations? The taxicab association will resell to taxi drivers. What happens if the taxi cab associate resells gasoline to both taxicab drivers and to the general public?

Answer: Yes the price discrimination is involved in the above given case, here the Gasoline company is selling the Gas at 3 cents less per gallon, than what it sells to the retail service station, this is a case of Incentives for the industrial buyers, The company is assured of getting the whole taxi drivers to buy fuel from them due to this step. Here Taxi associations would resell it to the taxi drivers at less price than of the retail station, here the same quality of the product in the same quantity is being sold at differential pricing.

If the associations sell the Gasoline to both the general public and Taxi drivers the whole point of giving differential pricing to the associations would be beaten, and there is a good probability that the Retail service stations would register their protest against this move. Retail service stations are their major customers, where usually the general public buy their gasoline. Hence there would be an agreement stating that the sales should be only to the taxi drivers.

Question 3. If a retailer sells a coat for $119.99. What was his markup if he bought the coat for $62.99?

a. Markup in actual dollars ________

Answer: The mark up in actual dollars is $119.99-$62.99 = $57.

b. Express markup as a % of cost _________

Answer: The markup on cost is given by 57/62.99 = 90.4%.

c. Express markup as a % of selling price _______

Answer: The mark up on selling price is given by 57/119.99 = 47.5%.

Question 4. An appliance retailer purchased a hand mixer for $18.00. He plans to take a 30% markup. What will the selling price be?

Answer: Selling Price : 18 x 1.3 = $23.4

Question 5. A stationery store desires a minimum 40% markup at retail. If a box of envelopes will be sold at retail for 79 cents per box, what is the maximum price the store can pay for them and still get its stated markup (40%)?

Answer: Selling price = $0.79

Markup% = 40%

Markup = selling price × markup%

Markup = $0.79 × 40% = $0.316

Cost = Selling price - markup = $0.79 - $0.316 = $0.474

Cost = $0.474

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Question 6. A sporting goods store has been offered a closeout purchase on bicycles. The cost of each bike is $105, and it should retail for $160. What markup at the retail price would the store obtain?

Answer: Retail sale price = $160

Less: Cost = $105

Markup = $55

Question 7. The XYZ Fencing company sells a custom made wooden gate through wholesalers and retailers. The retail selling price is $800.00 and the manufacturing cost to the company is $305.00. The retail markup was 35 percent and wholesale markup was 20 percent.

A. What was the cost to the wholesaler?

Answer: Retail price = $800

Cost to company = $305

Retail markup = 35%

Wholesale markup = 20%

Cost to wholesaler be 20% markup added on cost to company, so

Cost to wholesaler = (cost to company) + (cost to company) * wholesale markup/100

= $305 + ($305)*20/100

=$305 + ($305 * 0.20)

= $305 + $61

= $361

So cost to wholesaler will be $361.

B. What was the cost to the retailer?

Answer: Cost to the retailer will be 35% markup of cost to company, so below is the amount

Cost to retailer = (cost to company) + (cost to company) * retail markup/100

= $305 + ($305) *35/100

= $305 + ($305 * 0.35)

= $305 + $106.75

= $411.75

So the cost to retailer will be $411.75

C. What percentage markup on selling price did the producer make?

Answer: Percentage markup on selling price will be as per below

Markup value = Retail selling price - cost to company

= $800 - $305

= $495

Markup percentage will be percentage of markup value and cost to company. So,

Markup percentage = % of (Markup value / cost to company)

= % of ($495 / $305)

= 162.30%

So Markup percentage will be 162.30%

Question 8. a. Calculate the breakeven point in units at selling prices of $15.99, $19.99 and $29.99.

Answer: Fixed costs(FC) = 125000 $

Variable costs(VC) = 8.5 $/unit

i) Selling Price(SP) = 15.99 $

Break Even Point (in units) = FC/(SP - VC) = 125000/(15.99-8.5) = 16689 units

ii) Selling Price(SP) = 19.99 $

Break Even Point (in units) = FC/(SP - VC) = 125000/(19.99-8.5) = 10879 units

iii) Selling Price(SP) = 29.99 $

Break Even Point (in units) = FC/(SP - VC) = 125000/(29.99-8.5) = 5817 units

b. Which of these prices would you recommend and why?

Answer: Selling price of Walmart = 21.99 $

Total market = 250000 units

Max market share = 10%*250000 = 25000 units

BEP (units for Walmart price) = FC/(SP - VC) = 125000/(21.99 - 8.5) = 9266 units

The price that would be recommended for the blends is 19.99 $ to aim for nearly 10% of market share(10879 units) while keeping the price of the blend lower than that of Walmart's.

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Question 9. Using the average cost pricing and a 35% markup what will Yoplait price these product at the retail level

Answer: Average Cost : [(0.55x11000 + 0.60 x 13000 + 0.68 x 9000)]/[(11000 + 13000 + 9000)]
i.e. 0.6052

Selling Price : 0.6052 x 1.35 = 0.8169

Thus , Price : $0.82

Question 10. How many wine coolers does the company have to sell to reach this profit goal?

Answer: Quantity = (Fixed cost + profit)/(Selling Price - Variable Cost)

= (300000 + 60000)/(150-89.99)

= 5999 units

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