1. What other factors should Courtney consider when determine the unit retail price? provide explanation.

2. What price would you charge this year and how many units would you order? make sure to justify answer.

How much for the good smell? For the past two Christmas seasons, Courtney's, an upscale gift store, has carried a sweet-smelling potpourri in a plastic bag with an attractive ribbon. Heavily scented with cloves, the mixture gives a pleasant holiday aroma to any room, including the store. Two years ago, the mixture cost $4.50 a bag. Courtney's, (the only store in town that carried it), sold 300 pieces for $9.50. Courtney's supply ran out 10 days before Christmas, and it was too late to get any more Last year, the manufacturer raised his price to $5.00 so Courtney's raised its retail price to $9.95. Even though the markup was lower than the previous year, the store felt there was "magic" in the $10.00 price. As before, the store had a complete sellout, this time 5 days before Christmas. Sales last year were 600 units. This year, the wholesale price has gone up to $5.50, and store personnel are trying to determine the correct retail price. The owner once again wants to hold the price at $10.00 ($9.95), but the buyer disagrees: "It's my job to push for the highest possible markup when I can. The item is a sure seller, as we're still the only store around with it, and we had some unsatisfied demand last year. I think we should mark it at $12.50, which will improve the markup to 56%. Staying at $10.00 will penalize us unnecessarily, especially considering the markup would even lower than last year. Even if we run into price resistance, we'll only have to sell 480 to maintain the same dollar volume." The owner demurs, saying, "This scent is part of our store's ambience. It acts as a draw to get people into the store, and its pleasant smell keeps them in a free- spending state of mind. I think we should keep the price at $9.95, despite the poorer markup. And if we can sell many more at this price, we'll realize the same dollar gross margin as last year. I think we should buy 1000. Furthermore, if people see us raising a familiar item's price 25 percent, they might wonder whether our other prices are fair