3' The buyer for Christmas items for a large department store is trying to determine prices for this year's merchandise. Her manager indicated that the maintained gross margin for these items should be 45 percent of total sales. Last year, markdown reductions amounted to 25 percent of last year's total dollar sales of Christmas items. (a) Given that the buyer can assume that this year's markdown percentage will be similar to last year's, what is the initial gross margin that she should use? (b) Given your answer to Part (a), if a lighted Santa Claus lawn ornament costs the retailer $25.30, what should be its initial retail price? (c) Briefly explain what price segmentation is. When retail markdowns are used as a means of price segmentation, which of the six price- segmentation fences described in the course is being used? Explain your answer. Question 2 Part(a) From the above case, for sales of this product in Argentina, calculate the break-even sales level for a $24 price increase, Break even Sales Level : 5,500 units/($220$24) I 5,500 units/196 = 28,269 units Part(b) The break-even sales level in Argentina is $4,000. Part(c) The manufacturer sets the price for this product at $400 in the U.S. but knows that, because of people buying it from other places, every sale in Argentina causes a tenth of a sale to be lost in the U,S.The difference between the two break-even points is helpful for deciding on a price that will still make money. Question 3 Part (a) The initial gross margin the buyer should use is 40 percent. Part(b) The initial retail price should be $29.99. Part(c) Price segmentation is when a store decides to sell different things at different prices. Sometimes stores will do this depending on what time of year it is. When a store decides to sell different things at different prices, this is called price segmentation. There are six types of price segmentation fences, and one of them is when markdowns are used. When markdowns are used, the store is selling products at a lower price in order to get people to buy them. 2. A manufacturer sells a particular product in both Argentina and the US. In Argentina, the manufacturer has been selling 5,500 units per year of the product at a price of $220 and a contribution margin of 30 percent. (a) For sales of this product in Argentina, calculate the breakeven sales level for a $24 price increase. Show your work. (b) In the US, the manufacturer's price for this product is $400 and the contribution margin is 40 percent. The manufacturer knows that, because of gray market commerce, every one- unit change of sales of this product in Argentina leads to a 0.10-unit sales change in the opposite direction in the US. Given this information, recalculate the breakeven sales level in Argentina described in Part (a). Show your work. (c) Using the course material, describe the concept of a price corridor. Then explain how the difference between the breakeven you calculated in Part (b) and the one you calculated in Part (a) is helpful for applying the price- corridor concept in this situation