You have just opened a new pet store. You have ordered 200 dog beds into the store. You know that the fixed costs associated with selling those dog beds is $1,000 and you paid $20 per dog bed to buy them. Also, you want to have $200 profit after all of the beds are sold.

a) Based on this information, what formula will you use to determine the price for these beds and state why. Answer: You would have to use Breakeven point analysis to calculate the price. This would allow you to determine the price.

b) Using this formula, calculate the price for each of the dog beds. Answer: BEP = Total Cost/(price variable cost); 200 = ($1,000 + $200)/(P - $20) 200 = 1200/(P -$20); 200 * (P-$20) = 1200; 200P - $4000 = 1200; 200P = $5200; P = $5200/200; P = $26

c) Reflecting on various pricing strategies what might be reasons to adjust the price higher or lower based on the calculated price? Be specific in your answer and give an example.