7 Required information Part 1 of 7 Marketing Analytics: Setting the Exact Price 10 points You are the marketing manager for a sail manufacturing company that produces two sizes of sails: small and large. You are asked to help price the products so that the company is able to make a profit AND the customer is happy. Based on last year's sales, you expect to sell 15,000 small sails and 6,500 large sails in the upcoming year. The accounting department reports a total fixed cost for producing the small and large sails of $750,000 and $800,000 respectively. The variable cost per small sail is $800 while the variable cost per large sail is $1,200. Your pricing objective surrounds maximizing profit. Because of this, you have a target return on investment of 30% profit for each sail. Consider the following formulas as you proceed forward on this exercise: Markup on cost percentage = (Markup = Cost) x 100 Average cost of a single unit = All costs = Total number of units Target return price per unit = [(Fixed Costs + Target Return) = Units] + variable cost per unit Complete the spreadsheet below and use it to answer the questions that follow. This activity is important because marketing managers benefit from understanding how optimal price is calculated in order to set an exact price for an offering. The goal of this activity is to demonstrate an understanding of the role of price and apply different pricing tactics and strategies to a pricing model. (You must (1) complete the spreadsheet and (2) answer the questions that follow to receive full credit for this exercise.) (You must (1) complete the spreadsheet and (2) answer the questions that follow to receive full credit for this exercise.) Answer is complete but not entirely correct. A B D E 1 Total Cost Total Fixed Cost Total Cost $ $ 750,000.00 800,000.00 Average Cost of a Unit 12.750,000.00 8,600,000.00 DL 2 Small Sail 3 Large Sail 4 Average Total Cost 5 Small Sail 6 Large Sail 7 Mark up Price 8 Small Sail 9 Large Sail 10 Total Revenue 11 Small Sail 12 Large Sail Average Variable Cost Quantity $ 800.00 15,000.00 $ 1,200.00 6,500.00 Total Cost Quantity $ 850.00 X 15,000.00 $ 1,323.08 % 6,500.00 Markup on Cost Average Cost of a Unit Percentage $ 1,105.00 X 30% $ 1,720.00 30% Price Quantity $ 16,575,000.00 15,000.00 $ 11,180,000.00 6,500.00 Price Total Revenue Based on the data in the spreadsheet above, what is the total cost for small sails? $12,750,000.00