1. Marketing pricing be sure to show your formulas and calculations on the math problems so you can get partial credit if you make a small error.

Assume that you are the V.P. of marketing for a firm that produces refrigerated prepared pasta dishes for sale to consumers through various retail channels. You are considering producing a new line of all natural one-serving pasta dishes. Your research suggests that consumers would only be willing to buy the pasta if the price is less than $6.00 per package. You will be selling the pasta through specialty food brokers who will distribute to natural food stores who will sell to consumers. The natural food stores require a 30 percent retailer margin and the brokers require a 20 percent wholesaler margin.

a. Assuming the natural food stores will sell the product for $5.99 per package, what price will the specialty food brokers charge the food stores for the product?

b. What price will the manufacturer charge the specialty food brokers?

c. If the manufacturer costs are $0.95 per package, what will the manufacturer’s contribution per unit be?

2. Contribution analysis and break-even analysis are surely the most important and most frequently used marketing metrics. These analyses are essential to determine if a firm is a marketing opportunity will mean a financial loss or be profitable. Contribution is the difference between the selling price per unit and the variable cost per unit. Break-even analysis that includes contribution tells marketers how much must be sold to break even or to earn a desired amount of profit. Happy day’s dairy is a producer of high quality organic yogurt, sour cream and crème fraise. They are considering marketing a new line of drinkable yogurt for children. The new yogurt will be offered in packages of six 6-ounce individual containers and it will be available in four flavors. The company plans to use TV and newspaper advertising to promote the new product. Distribution will be through major supermarket chains which currently have over 90 percent of the U.S. yogurt market. The suggested retail price for each 6-ounce individual container will be $0.60. Because the retailer requires a 30 percent markup, happy days’ price to the supermarkets will be $0.42 per six-ounce container. The unit variable costs for the product including packaging will be $0.15. The company estimates its advertising and promotion expenses for the first year will be $1,500,000.

a. What is the contribution per unit for the new children’s yogurt product?

b. What is the break-even unit volume for the first year that will cover the planned advertising and promotion? The break-even in dollars?

c. How many units of the yogurt must happy days sell to earn a profit of $800,000?

3. Assume that you have been hired as the assistant manager of a local store that sells fresh fruits and vegetables. As you look over the store, you notice that there are two different displays of tomatoes. In one display, the tomatoes are priced at $1.39 per pound, and in the other, the tomatoes are priced at $.89 per pound. The tomatoes look very much alike. You notice that many people are buying the $1.39 tomatoes. Write a paragraph explaining what is happening and give your recommendations for the store’s pricing strategy.