Assume that you are in charge of pricing for a firm that produces pickles. You have fixed costs of $2,000,000. Variable costs are $0.75 per jar of pickles. You are selling your product to retailers for $0.89. You sell the pickles in cases of 24 jars per case.
a. How many jars of pickles must you sell to break even?
b. How much must you sell in dollars to break even?
c. How many jars of pickles must you sell to break even plus make a profit of $300,000?
d. Assume a retailer buys your product for $0.89. His business requires that he prices products with a 35 percent markup on cost. Calculate his selling price.
e. Assume you have an MSRP of $1.39 for the pickles. If a retailer has a required 35 percent retailer margin on all products he sells, what is the most he is willing to pay the producer for the pickles?
f. A clothing retailer knows that to break even and make a profit he needs to have a minimum retailer margin (also referred to as a contribution margin or gross margin) of at least 60 percent. If he is to sell a pair of shorts for the manufacturer’s suggested retail price of $49.99, what is the most he can pay the manufacturer for the shorts and maintain his margin?
g. A salesperson is developing a quote for a quantity of disposable hospital gowns. His cost for each case of gowns is $85.00. His firm requires that he have a 20 percent margin so he is using a markup on selling price calculation to price the gowns. What will his quote be per case of gowns if he uses a 20 percent markup on selling price?
