Question

Value 10% Data for Questions 3 and 4 Item Units Sold 100.000 Unit Cost $40 Target Refum on Sales Advertising $1,500,000 Consumer Promotion 51 00 000 Personal Selling 5 salespeople @ Seok each Dealer Promotion $1,200,000 Product Development $700.000 3. Calculate the break-even price. 4. What would the selling price have to be to get the target return? 5. What other factors besides break-even should you consider before setting price?

marketing 1200

Answer 1

1) Breakeven price = Unit cost + (Advertising + Consumer promotions + Personal selling + Dealer promotion + Product Development) / Units sold

= $40 + [(1,500,000 + 1,800,000 + 400,000 + 1,200,000 + 700,000) / 100,000]

= $40 + $56

= $96

2) Selling price = Breakeven price / (1 -Target return) = $96 / (1 - 10%) = $96 / 0.9 = $106.67

3) Besides break-even the factors that need to considered before setting price includes competition, purchasing power of customer, tiered pricing and competition