Questions (Please show all your calculations)

1. An appliance retailer purchased a small vacuum cleaner for $29.00. He plans to take a 35% markup. What will the selling price be? (Value 5 pts)

2. If a retailer sells a coat for $249.99. What was his markup if he bought the coat for

$168.33. (Value 15 pts)

Markup in actual dollars ________

Express markup as a % of cost ________

Express markup as a % of selling price ________

3. The Cosby Company sells water fountains through wholesalers and retailers. The retail selling price is $950.00 and the manufacturing cost to the company is $400.00. The retail markup was 40 percent and wholesale markup was 25 percent. (Value 10 pts)

1. What was the cost to the wholesaler?__________________
2. What was the cost to the retailer?_____________________
3. What was the producers markup in dollars_________________

Expressed producers markup as a percentage of cost____________ and percentage of selling price __________________

Please use the case and then answer the questions at the bottom

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, only uses 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 other sport shop retailer that usually handle SPI products. For example, Sports Depot prices all of its baseball gloves at $20, $40, or $60--with no prices in between. There are three big bins - one for each price point. Todd 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. Todd is not certain if Sports Depot 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. However, Dr. Pointer thinks that the Tennis racquets should be sold at $65 each. That would allow most retailers to add their normal markup and make a good profit and give a prestige image. However, if Sports Depot sells the racquet at the lower price other retailers might decide to carry it.

Questions for this section (15 pts.) What is the service organization's average cost for the printed tennis balls it buys from Sports Depot? __________________________

If SPI produces tennis racquets, how many racquets must it sell at $40.00 and $65.00 to break even? _______________________________

If SPI wants to make at least $20,000 profit off the racquets, at a selling price of $40.00 what would the breakeven be__________________________