Assume the following is true:

Variable cost per unit = $10

Fixed Cost = $300,000.

Expected unit sales=50,000 units

Desired Return on sales = 20% (0.2)

Manufacturer's unit cost=Variable Cost + (Fixed Cost/Unit Sales)

= 10 + (300,000/50,000) = $16

Markup price = unit cost/ (1-desired return on sales)

=16/ (1-.2) =16/.80=1600/80 =160/8 =$20

Target return Price =unit cost + (desired return*invested capital)/unit cost after assuming $1,000,000 invested capital

= 16 + (.20 *1,000,000)/50,000. = $20

Breakeven volume = Fixed Cost/ (Markup price -Variable Cost)

=$300,000/ ($20 - $10) = 30,000 units

1. Suppose you are the pricing strategist for a food processing system manufacturer. Markup pricing method and Target-return method are used. Your accounting department provides you with the following data:

Variable Cost (Cost of labor) = $20;

Fixed Cost = $600,000.00;

Expected sales = 100,000 units

Calculate the following. Make sure you show the formula you have used to determine each.

a) Unit cost;

b) Markup price by assuming 20% markup on sale;

c) Target-return price assuming the manufacturer invested $1 million in the business and wants to set price to earn a 30% rate of return (ROI); and

d) Break-even volume:

e) Suggest other possible alternative pricing strategies that may be available for marketing managers to use?

2. Describe the meaning marketing management and the functions of the marketing manager.

3. Some Food wholesale and retail firms are accepting orders for pick up or home delivery. Is this good innovation? Will this innovation have enough traction for increasing customer base? Explain the pros and cons.