solution

For each brand in the following table, calculate the manufacturer’s selling price (MSP), the per unit margin, and the gross margin as a percentage of MSP.

MSRP Volume Discount Promotion Allowance Unit Cost MSP Per Unit Margin Gross Margin %

Brand X $5.29 30% 15% $1.18 $3.70 $1.97 53%

Brand Y $4.99 35% 12% $0.74 $3.24 $2.11 65%

MSP = MSRP x (1 – Volume Discount)

$5.29*(1-.30)=MSP= $3.70

$4.99*(1-.35)=MSP= $3.24

Per Unit Margin = MSP x (1 – Promotion Allowance) – Unit Cost

$3.70*(1-.15)-$1.18=Per Unit Margin=$1.965
$3.24*(1-.12)-$0.74=Per Unit Margin=$2.11

Gross Margin (%) = Per Unit Margin / MSP

$1.97/$3.70= Gross Margin = 53%

$2.11/$3.24= Gross Margin = 65%

3. For large retailers, the MSP represents their product cost, which they will mark up to set the retail price. If the retailer has a target margin of 25%, what would the retail prices be for the brands in question 2?

Retail Price Brand X Brand Y?

Retail price with Mark-up= MSP/(1 – Mark-up)

Brand X:

= $3.70/(1- .25)

= $3.70/.75

= $4.94

Brand Y:

= $3.24/(1- .25)

= $3.24/.75

= $4.32

need an answer for only this =) :: Many small retailers will buy through a wholesaler instead of buying direct from the manufacturer. Given the pricing policy for Brand X in question 2, what would be the wholesaler’s selling price (WSP) if the wholesaler has a desired margin of 15%? If the retailer has a desired margin of 30%, what would the retail price be? What volume discount would the manufacturer have to offer for the retailer to price at MSRP?