Exercise 4: Mark-up Pricing Many consumers are surprised at the (profit) margin thar some retailers make on their sales. However, they do need fairly large margins to cover their significant rent and staff costs that they incur. In this activity, your task is to determine what average prices will need to be charged by these small retailers so they end up making a good weekly profit. ACTIVITY/TASK What price for chocolate? Rent (per week) $1.000 Staff costs (4 staff X $12.50 phr X 50 hrs pw) $2,500 $1,000 Depreciation of store fit-out pw (over a 5 year lease) Total Weekly Fixed Costs Forecasted Weekly Sales 1,000 chocolate units $1.000 Average chocolate unit cost Total Weekly Costs (Fixed and variable) Weekly profit Target Total Revenue Required What average chocolate unit price Therefore, what% mark-up should y 5 C $3.500 $1,000 What price for a haircut? 1 Rent (per week) in a major shopping 2. Staff costs (5 staffX S14 p/hr X 50 hrs 3. Depreciation of store fit-out pw (over a 5 4. Total Weekly Fixed Costs 5. Forecasted Weekly Sales 6. Commission paid to hairdresser per haircut 7. Total Weekly Costs (Fixed and variable) 8. Weekly profit Target 9. Total Revenue Required 10. What average haircut price would you set? So haircuts $2,000 ? Exercise 4: Mark-up Pricing Many consumers are surprised at the (profit) margin thar some retailers make on their sales. However, they do need fairly large margins to cover their significant rent and staff costs that they incur. In this activity, your task is to determine what average prices will need to be charged by these small retailers so they end up making a good weekly profit. ACTIVITY/TASK What price for chocolate? Rent (per week) $1.000 Staff costs (4 staff X $12.50 phr X 50 hrs pw) $2,500 $1,000 Depreciation of store fit-out pw (over a 5 year lease) Total Weekly Fixed Costs Forecasted Weekly Sales 1,000 chocolate units $1.000 Average chocolate unit cost Total Weekly Costs (Fixed and variable) Weekly profit Target Total Revenue Required What average chocolate unit price Therefore, what% mark-up should y 5 C $3.500 $1,000 What price for a haircut? 1 Rent (per week) in a major shopping 2. Staff costs (5 staffX S14 p/hr X 50 hrs 3. Depreciation of store fit-out pw (over a 5 4. Total Weekly Fixed Costs 5. Forecasted Weekly Sales 6. Commission paid to hairdresser per haircut 7. Total Weekly Costs (Fixed and variable) 8. Weekly profit Target 9. Total Revenue Required 10. What average haircut price would you set? So haircuts $2,000