Reference no: EM132618749

QMS has invested Rs. 50 million in refurbishing an existing facility to manufacture the new product. One production begins; the company estimates that it will incur fixed costs of Rs. 100 million. The variable cost to produce each device is estimated to be Rs. 12,500 and is expected to remain at that level for the output capacity of the facility. The company expects unit sales of 100,000 units. The company is using cost plus pricing (mark up pricing). QMS wants to earn a 25% markup on sales. QMS would be selling this product to consumers through wholesalers and retailers.

Problem 1: As mentioned above, QMS is expecting to sell its product to consumers though wholesalers and retailers, thus it must incorporate the margin that is offered to retailers and wholesalers. Suppose, retailers expect a 30% margin and wholesalers want a 10% margin on their respective selling prices. And suppose that QMS sets a manufacturer's suggested retail price (MSRP) of Rs. 27,000. What price QMS will charge to its wholesalers and retailers?