Product Pricing: Two Products Macquarium Inc. provides computer-related services to its clients. Its two primary services are Web page design (WPD) and Internet consulting services (ICS). Assume that Macquariums management expects to earn a 35% annual return on the assets invested. Macquarium has invested $12.0 million since its opening. The annual costs for the coming year are expected to be as follows:

	Variable Costs	Fixed Costs
Consulting support	$500,000	$3,500,000
Sales and administration	300,000	1,700,000

The two services expend about equal costs per hour, and the predicted hours for the coming year are 15,000 for WPD and 25,000 for ICS.

Required a. If markup is based on variable costs, how much revenue must each service generate to provide the profit expected by corporate headquarters? What is the anticipated revenue per hour for each service? Hint: Start by determining the markup rate.

	Total Revenue	Reveue per Hour
WPD	Answer	Answer
ICS	Answer	Answer

b. If the markup is based on total costs, how much revenue must each service generate to provide the expected profit? WPD Revenue: $Answer ICS Revenue: $Answer c. What is total revenue for part (a) and total revenue for part (b)? Total revenue for (a): $Answer Total revenue for (b): $Answer d. Label each of the following as an advantage or disadvantage of using a cost-based pricing model. 1. Relatively easy and convenient AnswerAdvantageDisadvantage 2. Based on cost data which may be erroneous AnswerAdvantageDisadvantage 3. Used for new products where there is not markeplace data AnswerAdvantageDisadvantage 4. Does not take into account product market demand AnswerAdvantageDisadvantage

Please answer all parts of the question.