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PRICING WORKSHEET - # 3 1. Suppose you own a copy business that targets college students. A) Assume the following Number of college students in

PRICING WORKSHEET - # 3

1. Suppose you own a copy business that targets college students.

A) Assume the following

Number of college students in the market: 25,000

Average number of copies per student per year 125

Your companys estimated share of the total market 13%

SOLVE FOR THE FOLLOWING:

Total annual market demand

Estimated annual company demand

Estimated monthly demand

Estimated weekly demand

B) Given the following for your copy business:

Annual Expenses:

Paper: $ 4,062.50 Salaries: $ 30,000

Rent: $ 12,000 Hourly labor: $ 62,400

Insurance: $ 2,500 Maintenance contract $ 2,000

Advertising: $ 1,800 Utilities: $ 2,400

Other Supplies: $ 5,000

Total Fixed Cost: Total Variable Cost:

Fixed Cost/unit: Variable Cost/unit:

C. Calculate the selling price per copy if you must have a markup of 25% on the selling price.

D. What is the selling price per copy if you desire a 150% markup on cost?

E. What is the markup on selling price with a $ .50 selling price per copy?

F. What is the markup on cost with a $ .50 selling price?

G. If you charge $.45 per copy, what is the highest your expenses can be and still maintain a

25% markup on selling price?

H. If you charge $.45 per copy, what is the highest your expenses can be and still

maintain a 150% markup on costs?

2. Using the information in question # 1 above, assume you will charge on average $.40 per

copy.

A) Calculate your monthly revenue.

B) Assume you lower the price from $.30 to $.24 per copy and you demand increases to10,812

copies weekly. Determine the elasticity of your demand. What can you infer about your

market?

C) Assume you raise the price from $.30 to $.45 per copy and your demand decreases by 1000

copies weekly. Determine the elasticity of your demand. What can you infer about your

market?

3.. Using the information in Question # 1 A and B above

A) Compute the Breakeven for each of the following:

1. Total annual revenue of $182, 812.50

2. Total annual revenue of $121, 875

3. Total annual revenue of $97,500image text in transcribedimage text in transcribed

FORMULAS AND RATIOS ELASTICITY Price Elasticity of demand = %change in quantity E= _Q2-Q11/01 % change in price _(P2 - P1)/P1 Elastic - greater than 1 Inelastic - less than 1 MARKUP PRICING When solving for markup Mark up on Cost: MU(C): (Selling Price - Cost) / Cost Mark up on Selling Price : MU(r): (Selling Price - Cost) / Selling Price When solving for selling price MUC): Selling Price = Total cost x (1.00 + MU%) MU(r): Selling Price = Total cost 1.00 - MU% When solving for costs MUC): Costs = Selling Price/ (1+MU%) MU(r): Costs = Selling Price X (1 - MU%) BREAKEVEN Break even = Fixed Costs Cont. Margin Cont. Margin = Selling price - Var. Cost FINANCIAL RATIOS Gross margin ratio = gross margin net sales Net Income ratio = net income net sales Operating expense ratio = total operating expenses net sales Returns and Allowances ratio = returns and allowances net sales Inventory turnover rate = costs of goods sold Average inventory at cost ROI = net income total investment

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