Question

D Keurig Inc. plans to introduce a new single-cup coffee brewing system to small offices throughout the United States. Unlike traditional coffee systems, the Keurig system is proprietary: only Keurig coffee, packaged as K-Cups, will work with a Keurig brewer. The manufacturing cost of a brewer is $82 and that of a K-Cup is 10 cents. The investment in production equipment for the cups costs about $400,000 and that for the packaging line is $60,000. The company plans to sell a starter system that consists of a brewer and 200 K-cups to offices via wholesalers who take a 25% markup on the price for the brewer and 50% markup on K-cups. The wholesalers will auto-ship K-cups to replenish supplies. The list price to offices is $200 a brewer and 50 cents per cup. (Hint: Set up 2 tables for channel pricing and add the numbers for a system.) Please save your work in the same Exam 3 Excel file as a new worksheet named Coffee.

Answer 1

	Unit Cost of Brewer to Keurug Inc	$    82.00
	Unit Cost of K-cups to Keurug Inc	$       0.10
	Starter System consists 1 Brewer & 200 K-cups
Q.14	Selling price of Starter System to offices
	List price to offices - Brewer	$ 200.00
	List price to offices - K- cups	$       0.50
	Selling price of Starter System to offices	$ 300.00	[1 brewer*$200+200 cups*$0.5 ]
Q.15	Selling price of Starter System to wholesalers
	Brewer
	List price to offices - Brewer	$ 200.00
	Markup on brewer taken by whole saler	25%
	Margin of wholesaler - Brewer in $	$    40.00	[200*25%/(100%+25%)]
	[Markup is always on cost]
	Sale price to wholesaler - Brewer	$ 160.00	[200-160]
	K cups
	List price to offices - K-cups	$       0.50
	Markup on K-cups taken by whole saler	50%
	Margin of wholesaler - K-cups in $	$       0.17	[0.5*50%/(100%+50%)]
	[Markup is always on cost]
	Sale price to wholesaler - K-cups	$    0.333	[200-160]
	Sale price to wholesaler - Brewer	$ 160.00
	Sale price to wholesaler - K-cups	$    0.333
	Selling price of Starter System to offices	$ 226.60	[1 brewer*$160+200 cups*$0.333 ]
Q.16	Unit Brewer contribution to Keurig Inc.
	Sale price per unit to wholesaler of Brewer	$ 160.00
	Less: Unit Cost of Brewer to Keurug Inc	$ (82.00)
	Unit Brewer contribution to Keurig Inc.	$    78.00
Q.17	Unit K-cups contribution to Keurig Inc.
	Sale price per unit to wholesaler of K-cups	$       0.33
	Less: Unit Cost of K-cups to Keurug Inc	$    (0.10)
	Unit K-cups contribution to Keurig Inc.	$       0.23