Calculate what is the retailer markup in dollars

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Reference no: EM13726015

Retailers and wholesalers use traditional markups that they feel will yield a reasonable rate of profit. Answer the following set of problems.

1. The usual retail price of an item is $100. The manufacturer's cost to produce the item is $40. Retailers take a 50 percent markup and wholesalers take a 10 percent markup (markup is calculated on selling price, unless otherwise is indicated).

a. What is the retailer's markup in dollars?______________________________

b. What is the wholesale price?_______________________________________

c. What is the manufacturer's price?___________________________________

d. What is the manufacturer's markup percentage?_______________________

2. The XYZ Manufacturing Company is trying to set its price on a product that will sell at retail for $80.

a. For retailers to earn a markup of 25 percent, what should the wholesale price be? ________________________

b. For the wholesalers to earn a markup of 10 percent, what should the manufacturer's price be? _________________________

3. Complete the following table by filling in the blanks.

	Quantity Produced
	0	1	2	3	4
Total cost	______	______	______	______	$400
Total fixed cost	$120	______	_______	______	______
Total variable cost	_____	______	$140	______	______
Average cost	n/a	______	______	$110	______
Average fixed cost	n/a	______	______	______	______
Average variable cost	n/a	$70	______	______	______

4. Suppose you were considering going into the car-wash business and investing in a new kind of car-washing unit which is more mechanized than the usual ones-but also has higher fixed costs. Calculate the break-even point in dollars and units if the usual price of $4 per car were charged. The variable cost per car is estimated at $2. The total fixed cost per year (including depreciation, interest, taxes, fixed labor costs, and other fixed costs) is estimated at $320,000.

a. Break-even Point in $ __________________________

b. Break-even Point in units________________________

c. Calculate the break-even points (in $ and units) if the retail price of car wash drops to $3.50 per car due to competition in the future.

d. Break-even point in $ ___________________________

e. Break-even point in units ________________________

f. Should you go into the car-wash business in any of the above situations? Explain.

Reference no: EM13726015

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