Suppose you have been asked to help with the following two pricing decision scenarios:

Scenario 1:

Lake McDonald Gift Shop has decided to price the games that it sells at cost plus 65%. The National Parks Memory Card Game costs $20 each, and another one, the Guess This Animal Track Game, costs $40 each.

1. Calculate the price that Lake McDonald Gift Shop will charge for each National Parks Memory Card Game.
2. Calculate the price that Lake McDonald Gift Shop will charge for each Guess This Animal Track Game.
3. Briefly explain two specific challenges that the financial manager of Lake McDonald Gift Shop might encounter in employing this cost-plus pricing approach.

Scenario 2:

H.Banks Company would like to design, produce, and sell versatile toasters for the home kitchen market. The toaster will have four slots that adjust in thickness to accommodate both slim slices of bread and oversized bagels. The target price is $60. Banks require that new products be priced such that 20% of the price is profit.

• Calculate the amount of desired profit per unit of the new toaster.
• Calculate the target cost per unit of the new toaster.
• Briefly explain one benefit and one drawback of this type of pricing decision.