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A manufacturer does marketing research and estimates that consumers will accept a price of $100 for a jacket. The manufacturer expects to offer trade discounts
A manufacturer does marketing research and estimates that consumers will accept a price of $100 for a jacket. The manufacturer expects to offer trade discounts of 30/25/10 to retailers, wholesalers and agents, respectively.
- Calculate the price that the manufacturer will receive for its jacket. What prices will the other channel members receive? (5 points)
- In its manufacturing factory, the manufacturer has to incur costs of $1,500 in rent each month, $500 in utilities, $200 in advertising and $1000 for salaries to the company owner. All materials required to manufacture a jacket cost $20. Given the price the manufacturer receives for a jacket, calculate how many jackets the manufacturer needs to sell in order to break even. (5 points)
- The manufacturer is unhappy with its profitability and thinks that he can increase the price of the jackets in order to increase his revenue. He hires you, a marketing analyst to advise him. You perform an elasticity analysis and find out that elasticity for similar jackets is -3. What do you tell the manufacturer? What should he do? Should he increase prices? (3 points)
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