Most difficult marketing-mix decisions

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Reference no: EM133951013

Question

Pricing is one of the most difficult marketing-mix decisions. In this case, the decision is complicated because TSL wants to increase distribution. Similar to most start-ups, TSL has discovered that it can be very difficult to refuse a customer, especially a potentially large customer, even when it puts pressure on profits and could have repercussions for the brand in the long run. So, given the team's challenge, we will enlist your help. Your task is to make a pricing decision based on some additional data. Create a spreadsheet to complete the following tasks:

1. Assume Target sells a box of four TSL bars for $4.99 and has a 20% margin (meaning they keep 20% of the $4.99 per box). What is the price Target pays for each box to TSL?

2. How much does Target make for each box sold? (This is the unit contribution for Target.)

3. What is the markup for Target for each box of bars? For each bar?

4. If it costs TSL $0.55 for each bar in variable costs (all variable costs included), how much does TSL make per bar in-unit contribution? (Remember, Unit Contribution = Unit Price - Unit Variable Cost.)

5. What is TSL's contribution margin? What is TSL's markup?

6. If TSL has $25,000 in fixed costs, how many boxes do they need to sell through Target to break even? (Remember, Break-Even Units = Fixed Costs / Unit Contribution.)

Reference no: EM133951013

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