2. Using the information in question # 1 above, assume you will charge on average $.40 per

copy.

A) Calculate your monthly revenue.

B) Assume you lower the price from $.30 to $.24 per copy and you demand increases to10,812

copies weekly. Determine the elasticity of your demand. What can you infer about your

market?

C) Assume you raise the price from $.30 to $.45 per copy and your demand decreases by 1000

copies weekly. Determine the elasticity of your demand. What can you infer about your market?

3. Using the information in Question # 1 A and B above

A) Compute the Breakeven for each of the following:

1. Total annual revenue of $182, 812.50

2. Total annual revenue of $121, 875

3. Total annual revenue of $97,500

B) Compute the BE at each of the 3 selling prices given in # 1 A above with a profit goal of

$27,000

C) Compute the BE at each of the 3 selling prices given in # 1 A with a profit goal of 10% of

sales.

D. What price are you going to charge for your product? What factors will

influence your decision?

4. Channel Markups: (always solved using formula based on selling price MU r )

A manufacturer sells a $17.00 item to the wholesaler for $22.00. The wholesaler in

turn sells it to the retailer for $28.00 and the retailer sells it to the public for $33.00.

What is the markup at each level? What does the consumer pay for the item?

MARGINAL ANALYSIS

(Refer to Slides # 20, 21, 22)

5.

Q P TR TC MR MC MR - MC

210 1500 11,000

211 1650 14,000

212 1800 17,800

213 1700 21,500

214 1850 28,000

A. What is the marginal revenue from selling the 214th unit of output?

B. What is the marginal cost for producing the 210^th unit of output?

C. What is the marginal profit at 213 units of output?

D. At what level of output are profits maximized?

E. What is the optimum selling price?

CASH DISCOUNT

(Refer to slide # 27)

6. A manufacturer sends an invoice dated Oct. 1 with terms 2/15, n/60 in the

amount of $1,575. If the invoice is paid on or before Oct. 16, what amount is

paid? If you dont take advantage of the discount and the invoice is paid on

or before Nov. 30, what amount is paid? If paid Dec. 1 or later, what amount is paid?

125 1. Suppose you own a copy business that targets college students. A) Assume the following Number of college students in the market: 25,000 Average number of copies per student per year Your company's estimated share of the total market 13% SOLVE FOR THE FOLLOWING: Total annual market demand = 25000 x 125 = 3,125,000 copies Estimated annual company demand = 13% x 3,125,00 = 406,250 copies Estimated monthly demand = 3125000 / 12 months = 260,417 copies Company 13% x 260417 = 33.85 copies Estimated weekly demand - 3125000 / 52 weeks = 60.096 copies Company 13% x 60,096 = 7813 copies B) Given the following for your copy business: Annual Expenses: Paper: Rent: Insurance: Advertising Other Supplies $ 4,062.50 $ 12,000 $ 2,500 $ 1,800 $ 5,000 Salaries: Hourly labor: Maintenance contract Utilities: $ 30,000 $ 62,400 $ 2,000 $ 2,400 Total Fixed Cost: 48,3000 Fixed Cost/unit: 48,300/406250 = 0.12 Total Variable Cost: 73862.50 Variable Cost/unit: 73.862.5/406.250 = 0.18 Total Fixed Cost: 48,3000 Fixed Cost/unit: 48,300 / 406250 = 0.12 Total Variable Cost: 73862.50 Variable Cost/unit: 73.862.5 / 406.250 = 0.18 C. Calculate the selling price per copy if you must have a markup of 25% on the selling price. Total cost per copy=0.12 +0.18 = 0.30 Selling Price per copy = 0.30 x 100/75 = 0.40 D. What is the selling price per copy if you desire a 150% markup on cost? Selling Price per Copy=0.30 x 150% = 0.45 E. What is the markup on selling price with a $.50 selling price per copy? Mark-Up-Sp-cp = 0.50 -0.30 = 0.20 Mark up on sp. =(0.20 /0.50) x 100 = 40 % F. What is the markup on cost with a $.50 selling price? (0.2010.30) x 100 = 66.67% G. If you charge $.45 per copy, what is the highest your expenses can be and still maintain a 25% markup on selling price? Cost + Mask-up sp Cost +(25% x 0.45)=0.45 Cost=0.45 -0.1125 = 0.3375 (Maximum expense) H. If you charge $.45 per copy, what is the highest your expenses can be and still maintain a 150% markup on costs? X+1.5 x=0.45 2.5x = 0.45 X=0.18 (Max expense) 125 1. Suppose you own a copy business that targets college students. A) Assume the following Number of college students in the market: 25,000 Average number of copies per student per year Your company's estimated share of the total market 13% SOLVE FOR THE FOLLOWING: Total annual market demand = 25000 x 125 = 3,125,000 copies Estimated annual company demand = 13% x 3,125,00 = 406,250 copies Estimated monthly demand = 3125000 / 12 months = 260,417 copies Company 13% x 260417 = 33.85 copies Estimated weekly demand - 3125000 / 52 weeks = 60.096 copies Company 13% x 60,096 = 7813 copies B) Given the following for your copy business: Annual Expenses: Paper: Rent: Insurance: Advertising Other Supplies $ 4,062.50 $ 12,000 $ 2,500 $ 1,800 $ 5,000 Salaries: Hourly labor: Maintenance contract Utilities: $ 30,000 $ 62,400 $ 2,000 $ 2,400 Total Fixed Cost: 48,3000 Fixed Cost/unit: 48,300/406250 = 0.12 Total Variable Cost: 73862.50 Variable Cost/unit: 73.862.5/406.250 = 0.18 Total Fixed Cost: 48,3000 Fixed Cost/unit: 48,300 / 406250 = 0.12 Total Variable Cost: 73862.50 Variable Cost/unit: 73.862.5 / 406.250 = 0.18 C. Calculate the selling price per copy if you must have a markup of 25% on the selling price. Total cost per copy=0.12 +0.18 = 0.30 Selling Price per copy = 0.30 x 100/75 = 0.40 D. What is the selling price per copy if you desire a 150% markup on cost? Selling Price per Copy=0.30 x 150% = 0.45 E. What is the markup on selling price with a $.50 selling price per copy? Mark-Up-Sp-cp = 0.50 -0.30 = 0.20 Mark up on sp. =(0.20 /0.50) x 100 = 40 % F. What is the markup on cost with a $.50 selling price? (0.2010.30) x 100 = 66.67% G. If you charge $.45 per copy, what is the highest your expenses can be and still maintain a 25% markup on selling price? Cost + Mask-up sp Cost +(25% x 0.45)=0.45 Cost=0.45 -0.1125 = 0.3375 (Maximum expense) H. If you charge $.45 per copy, what is the highest your expenses can be and still maintain a 150% markup on costs? X+1.5 x=0.45 2.5x = 0.45 X=0.18 (Max expense)