Sketchy information on firm pricing practices

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Reference no: EM13967447

George Constanza is a project coordinator at Kramer-Seinfeld & Associates, Ltd., a large Brooklyn-based painting contractor. Constanza has asked you to complete an analysis of profit margins earned on a number of recent projects. Unfortunately, your predecessor on this project was abruptly transferred, leaving you with only sketchy information on the firm's pricing practices.

A. Use the available data to complete the following table:

Price

Marginal Cost

Markup on Cost (%)

Markup on Price (%)

$100

$25

300.0

75.0

240

72

 

 

680

272

150.0

60.0

750

 

100.0

 

2,800

 

 

40.0

 

2,700

33.3

 

 

3,360

 

20.0

5,800

 

 

10.0

6,250

 

5.3

 

 

10,000

 

0.0

B.    Calculate the missing data for each of the following proposed projects, based on the available estimates of the point price elasticity of demand, optimal markup on cost, and optimal markup on price:

Project

Price Elasticity

Optimal Markup on Cost (%)

Optimal Markup on Price (%)

1

-1.5

200.0

66.7

2

-2.0

 

 

3

 

66.7

 

4

 

 

25.0

5

-5.0

25.0

 

6

 

11.1

10.0

7

-15.0

 

 

8

-20.0

 

5.0

9

 

 

4.0

10

-50.0

2.0

 

 

 

 

 

Reference no: EM13967447

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