Principles of Marketing

Shushmann Studios Selma Shushmann is a small art dealer. Ms Shushmann is thinking about setting-up a framing shop in her art gallery. According to a demand analysis, the owner will have the following demand: Number of Frames Price 6200 $60 and below 5600 $65 4900 $70 4100 $75 Variable cost is a constant $22 per unit Fixed cost is a constant $26,000 Calculate the elasticity going from $70 to $75 Calculate the price at a target profit of $7,000 and at an annual volume of 1,000 units Calculate the price at a target return on investment of 20% at a volume of i i 20 units What price should Ms Shushmann charge if she wishes to maximize profits? when selling paintings, Ms Shushmann usually charges a 50% markup on selling price. Diageo, an up and coming painter usually works on a 50% markup on cost. For a painting that sales for $5,000, which mark-up system would make Diageo better off (calculate the how much Diageo receives from each method) 1. 2. 3. 4. 5