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How much will retailers charge farmers for the product

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Reference no: EM131580344

Question - VetDiet is an animal feed startup company. It plans to launch a new chicken feed and is considering two different markets: the hobby farm market that is made up of people that raise a small number of chickens for their own use and the commercial poultry market that is made up of large farms that raise chickens for the commercial sell.

In both markets, VetDiet would sell its product to retailers that would then sell the product to farmers. In the hobby farm market, retailers base their prices on a 35% markup over cost. In the commercial poultry market, retailers base prices on a 15% margin of selling price.

The costs for VetDiet to enter the hobby farm market are different from the costs required to enter the commercial poultry market.  If VetDiet enters the hobby farm market, its revenue breakeven volume will be $600,000. If VetDiet enters the commercial poultry market, its revenue breakeven volume will be $9,000,000. Estimates of market size are shown in the table.

1. If VetDiet charges retailers in the hobby farm market $20.00 per 100-pound bag, how much will retailers charge for the product? If VetDiet charges retailers in the commercial poultry market $10.00 per 100-pound bag, how much will retailers charge farmers for the product?

2. If VetDiet wants retailers in the hobby farm market to price the product at $30.00 per bag, how much should it charge retailers?  If VetDiet wants retailers in the commercial poultry market to price its product at $15.00 per bag, how much should it charge retailers?

Reference no: EM131580344

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