A manufacturer does marketing research and estimates that consumers will accept a price of $600 for a premium suit. The manufacturer expects to offer trade discounts of 20/15/20 to retailers, wholesalers and agents, respectively.

1. Calculate the price that the manufacturer will receive for its suit. What prices will the other channel members receive? (4 points)

2. In its manufacturing factory, the manufacturer has to incur costs of $500 in rent each month, $500 in utilities, $200 in advertising and $2000 for salaries to the company owner. All materials required to manufacture a suit cost $120. Given the price the manufacturer receives for a jacket, calculate how many jackets the manufacturer needs to sell in order to break even. (3 points)

3. The manufacturer is unhappy with its profitability and thinks that he can increase the price of the suits 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 suits is -0.5. What do you tell the manufacturer? What should he do? Should he increase prices? (5 points)