Marketing

Use this information for all the questions below that refer to the Sporting Products, Inc. (SPI) case.

Randy Todd, marketing manager for Sporting Products, Inc. (SPI), is thinking about how changes taking place among retailers in his channel might impact his strategy.

SPI sells the products it produces through wholesalers and retailers. For example, SPI sells basketballs to Wholesale Supply for $8.00. Wholesale Supply uses a 20 percent markup, and most of its "sport shop" retailer customers, like Robinson's Sporting Goods, use a 33 percent markup to arrive at the price they charge final consumers. However, one fast-growing retail chain, Sports Depot, uses only a 20 percent markup for basketballs, even though it pays Wholesale Supply the same price as other retailers. Furthermore, Sports Depot occasionally lowers the price of basketballs and sells them at cost, to draw customers into its stores and stimulate sales of its pricey basketball shoes.

Sports Depot is also using other pricing approaches that are different from the sports shops that usually handle SPI products. For example, Sports Depot prices all its baseball gloves at $20, $40, or $60with no prices in between. There are three big bins, one for each price point.

Randy is also curious about how Sports Depot's new strategy to increase sales of tennis balls will work out. The basic idea is to sell tennis balls in large quantities to nonprofit groups, who resell the balls to raise money. For example, a service organization at a local college bought 2,000 tennis balls printed with the college logo. Sports Depot charged $.50 each for the tennis balls, plus a $500 one-time charge for the stamp to print the logo. The service group plans to resell the tennis balls for $2.50 each and contribute the profits to a shelter for the homeless.

Randy is not certain if Sports Depot's ideas will affect SPI's plans. For example, SPI is considering adding tennis racquets to the lines it produces. This would require a $500,000 addition to its factory, as well as the purchase of new equipment that costs $1,000,000. The variable cost to produce a tennis racquet would be $20, but Todd thinks that SPI could sell the racquet at a wholesale price of $40 each. That would allow most retailers to add their normal markup and make a profit. However, Sports Depot may sell the racquet at a lower than normal price.

Q2. What is the final selling price Robinsons Sporting Goods charges for a SPI basketball?

Q3. What is the final selling price Sports Depot charges for an SPI basketball?

Q4. SPI pays its salespeople a commission on each product they sell. The commission is.Explain your choice

A) part of the total costbut not specifically a fixed or a variable cost.

B) part of the total fixed cost.

C) not included in figuring average cost.

D) a variable cost.

E) None of these answers is correct.

Explanation:

Q5. Which of the following would NOT be one of SPI's fixed costs in the production of basketballs?

A) rent on the building used to store its ball inventory

B) rubber used to make the balls

C) property taxes for the building used to make the balls

D) depreciation on the equipment used to make the balls

E) insurance on the building used to make the balls

Explanation:

Q6. What is the service organization's average cost for the printed tennis balls it buys from Sports Depot?

Q7. How many of the printed tennis balls must the service organization sell to cover the $500 fixed printing charge?

Q8. If SPI produces tennis racquets, how many racquets must it sell at $40 to break even?

Tools Help All changes saved in Drive E mal text, Arial , 11. B IUAG E 123 SPI sells the products it produces through wholesalers and retailers. For example, SPI sells basketballs to Wholesale Supply for $8.00. Wholesale Supply uses a 20 percent markup, and most of its "sport shop" retailer customers, like Robinson's Sporting Goods, use a 33 percent markup to arrive at the price they charge final consumers. However, one fast-growing retail chain, Sports Depot, uses only a 20 percent markup for basketballs, even though it pays Wholesale Supply the same price as other retailers. Furthermore, Sports Depot occasionally lowers the price of basketballs and sells them at cost, to draw customers into its stores and stimulate sales of its pricey basketball shoes. Sports Depot is also using other pricing approaches that are different from the sports shops that usually handle SPl products. For example, Sports Depot prices all its baseball gloves at $20, $40, or $60with no prices in between. There are three big bins, one for each price point. Randy is also curious about how Sports Depot's new strategy to increase sales of tennis balls will work out. The basic idea is to sell tennis balls in large quantities to nonprofit groups, who resell the balls to raise money. For example, a service organization at a local college bought 2,000 tennis balls printed with the college logo. Sports Depot charged $.50 each for the tennis balls, plus a $500 one-time charge for the stamp to print the logo. The service group plans to resell the tennis balls for $2.50 each and contribute the profits to a shelter for the homeless. Randy is not certain if Sports Depot's ideas will affect SPI's plans. For example, SPI is considering adding tennis racquets to the lines it produces. This would require a $500,000 addition to its factory, as well as the purchase of new equipment that costs $1,000,000. The variable cost to produce a tennis racquet would be $20, but Todd thinks that SPI could sell the racquet at a wholesale price of $40 each. That would allow most retailers to add their normal markup and make a profit. However, Sports Depot may sell the racquet at a lower than normal price. Q8. If SPI produces tennis racquets, how many racquets must it sell at $40 to break even?| Messages Tools Help All changes saved in Drive E mal text, Arial , 11. B IUAG E 123 SPI sells the products it produces through wholesalers and retailers. For example, SPI sells basketballs to Wholesale Supply for $8.00. Wholesale Supply uses a 20 percent markup, and most of its "sport shop" retailer customers, like Robinson's Sporting Goods, use a 33 percent markup to arrive at the price they charge final consumers. However, one fast-growing retail chain, Sports Depot, uses only a 20 percent markup for basketballs, even though it pays Wholesale Supply the same price as other retailers. Furthermore, Sports Depot occasionally lowers the price of basketballs and sells them at cost, to draw customers into its stores and stimulate sales of its pricey basketball shoes. Sports Depot is also using other pricing approaches that are different from the sports shops that usually handle SPl products. For example, Sports Depot prices all its baseball gloves at $20, $40, or $60with no prices in between. There are three big bins, one for each price point. Randy is also curious about how Sports Depot's new strategy to increase sales of tennis balls will work out. The basic idea is to sell tennis balls in large quantities to nonprofit groups, who resell the balls to raise money. For example, a service organization at a local college bought 2,000 tennis balls printed with the college logo. Sports Depot charged $.50 each for the tennis balls, plus a $500 one-time charge for the stamp to print the logo. The service group plans to resell the tennis balls for $2.50 each and contribute the profits to a shelter for the homeless. Randy is not certain if Sports Depot's ideas will affect SPI's plans. For example, SPI is considering adding tennis racquets to the lines it produces. This would require a $500,000 addition to its factory, as well as the purchase of new equipment that costs $1,000,000. The variable cost to produce a tennis racquet would be $20, but Todd thinks that SPI could sell the racquet at a wholesale price of $40 each. That would allow most retailers to add their normal markup and make a profit. However, Sports Depot may sell the racquet at a lower than normal price. Q8. If SPI produces tennis racquets, how many racquets must it sell at $40 to break even?| Messages